Use your losses to save tax

There is an "awful air" of finality about the monthly payslip. But, even if you are payrolled staff, there's more scope for to cut your tax than you may think, says The Schmidt Report. Take a "highly paid, and therefore highly taxed", director or employee of a firm who spends his free time working on his personal property portfolio (although it could be a project that has the ultimate aim of earning money, such as developing software).

He has acquired three properties for £500,000 in recent years, putting down a £100,000 deposit and borrowing a further £400,000. Unfortunately, their value has now fallen to £300,000.As long as these properties were bought to be sold on at a profit, a loss can be generated and utilised, even though none of them has yet been sold. "It's a simple accounting exercise of writing down the cost of your closing 'stock' of properties to their net realisable value". The £200,000 (£500,000- £300,000) loss generated on paper can be offset against employment income, netting a "cool £80,000 (at 40%) back from the government". Contact your tax adviser for advice on individual circumstances.

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