General approach to tax planning

1. Make sure you keep complete and accurate business records. They can reduce the risk of paying extra tax and penalties if you are subject to an enquiry. The Tax Inspector’s favourite question is, ‘Where did this money come from? By making a note of the source of any payments into your business or private bank accounts, you will later be able to prove where the money originated and prevent HMRC taxing these receipts as if they were undeclared business income.

2. Use all the tax reliefs and tax-free benefits available to you as far as is practicable. Some, such as the personal allowance and age allowances, are given automatically, but others need to be claimed, e.g. Child Tax Credits and Child Benefit.

3. Be aware that tax reliefs and rules can be changed with little or no notice. For example, the provision of tax-free computer equipment to employees was stopped with only two weeks’ notice. So be as flexible as possible with your tax planning, and have a back-up plan to put into action if a scheme or tax relief is withdrawn.

4. If a tax planning scheme sounds too good to be true, it probably is. In particular, do not get involved in a tax scheme that relies on the non-declaration of income or capital gains, as that would be illegal.

The FSA does not regulate taxation advice and some aspects of buy to let arrangements.

Levels, bases of and reliefs from taxation may be subject to change.

The value of your investment can go down as well as up and you may not get back the full amount invested