How can I lower my tax bill?

Where to Start
When you're looking to lower your tax bill, you'll probably want to meet with your tax adviser or accountant. But your portfolio could yield some opportunities, too.

Below are a few ideas to consider. While some may be better suited to you than others, you can talk to an Edward Jones financial adviser about which ones make the most sense for your personal situation.

Your Retirement Plan
Two investment 'wrappers' that are often used as part of a retirement plan are Pensions and Individual Savings Accounts (ISAs).

Pensions come in a number of forms and the benefits differ slightly depending on whether they are occupational or personal. However, all pensions offer contributions that are tax deductible. This gives an equivalent growth rate of 28% for basic rate taxpayers and over 66% for higher rate taxpayers.

All pensions benefit from tax efficient growth. The 10% tax on dividends cannot be reclaimed, but there are no other tax deductions.

Most pensions offer an element of tax-free cash when taking the benefits. The income received is however, taxable. Benefits must normally be taken between the ages of 50 and 75.

ISAs do not benefit from tax deductible contributions, but have the same tax efficiency on growth and can be structured to give a tax-free income when required.

The levels of contributions to pensions and ISAs are restricted.

Your Portfolio
Opportunities to lower your tax bill can also be found by reviewing your investments or investing in an ISA, capital investment bonds or pensions. When you are looking to sell shares you already own, remember to consider tax implications, and conversely, tax benefits. By using your capital gains allowance you could avoid a significant tax bill

Consider Other Areas
In addition to your retirement plan and your portfolio, you might also find tax benefits in other areas of your life. For example, if you have a home-based business, you may want to see if you qualify for expense deductions. This could include claiming a percentage of your total home ownership cost, deducting daily expenses like office supplies, postage and more.

Talk to Us
To see how some of these ideas could work for you, contact your local financial adviser. We can assess where you are now, talk about any steps you've already taken and decide where to go from there. Bottom line: When you lower your tax bill, you keep more of what you've earned and that's something everyone wants.

Further information regarding contributions and tax implications are listed below:

CONTRIBUTION LIMITS
Increased Annual Allowance for Contributions
You will be able to invest up to 100% of your earnings into a pension each year and still receive tax relief. The maximum annual allowance in 2008/09 will be £235,000, whether it comes only from your contributions or is a combination of your and your employer's contributions. If you have no earned income, you will still be able to invest £3,600 a year before tax relief.

Lifetime Allowance
With the new rules, everyone will have a lifetime allowance, initially set at £1.5 million for 2006/07. This allowance increases annually (see chart). Any benefits accrued prior to A-Day can receive tax protection under the new rules with proper planning.

• From April 2008, change in the ISA rules mean that all PEPs are now classified as ISA's.
• You can invest up to £7,200 in stocks and shares ISA any one tax year and up to £3,600 in a cash ISA.
• For the 2008/09 tax year you can transfer cash ISAs from previous tax years into a stocks and shares ISA in addition to your 2008 allowance.

Tax implications should only be a consideration when making investment decisions, not the driving force.

Please consult your tax adviser. Edward Jones and its employees are not authorised to offer tax and legal advice. Cash ISAs once transferred to a stocks and shares ISA cannot be transferred back to a cash ISA.