How to pay tax like Facebook

How do you feel about the fact that social media behemoth Facebook probably pays less tax than you? Probably a bit mad; but I don't want you to get mad, I want you to get even and reduce your tax bill too.

Apparently Facebook paid corporation tax of just £4,327 in a year, which is less than a person on the average UK wage - who pays £5,393 in income tax and national insurance.

Reports such as these make you wonder just where chancellor George Osborne is cracking down on large company tax avoidance, as he promised to do.

The thing is Facebook hasn't done anything illegal, it's reduced its tax bill via legitimate means and so can you.

Get married

Married couples and those in civil partnership can split assets between them and therefore share the tax bills; this includes portfolios of investments, rental income, property gains, bank accounts, and shares. Sharing the income and gains between you can help you share not only the income tax bill but also gains you make when you sell investments – this is especially useful if one of you is a lower rate taxpayer than the other.

Use allowances

There are lots of allowances available to you, not just the personal allowance (the amount you can earn before paying any income tax). One underused one is the capital gains tax (CGT) allowance – you can make gains of £11,100 a year before paying CGT, which is paid at either 18% or 28% depending on if you're a basic or higher rate taxpayer. For those in retirement, this could be a huge boost as you could cash in shares to fund your lifestyle rather than taking an income from somewhere, such as a pension.

Plan for IHT

Inheritance tax (IHT) is one of the most hated taxes, but it is a voluntary tax, because you can arrange your estate to avoid paying it. Planning for IHT can be done as early as you like by making gifts in life, ringfencing assets in trust, and making charitable donations.

Retirement plans pay

One of the best ways to claw back tax from the state is to make pension contributions. Every time you make a pension contribution the government tops it up with tax relief at your marginal rate of income tax. Essentially the government is giving you free money for being wise and saving for your future, so do it!

You may not have the fancy accountants available to you that Facebook does but you can do a lot to minimise your tax bill and you know what they say: if you can't beat 'em, join 'em.

Read more:

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