Your Top 9 personal tax tips
“Sometimes I feel like a pelican,” says butler Edmond Blackadder in the eponymous comedy series, “whichever way I turn I still have an enormous bill in front of me.”
As taxpayers, it’s not hard to sympathise with him. Income Tax, VAT, National Insurance, Capital Gains Tax… the list goes on. Whenever you have some money coming in, it seems like the taxman is at your shoulder demanding a share.
Fortunately, with a bit of planning, there are plenty of common sense and legal ways to cut your tax liabilities. So if you too feel like a pelican, read on if you’d like that bill to be that bit smaller.
1. Top up your pension
For the tax year 2016-17, you can get tax relief on pension contributions up to 100% of your earnings, or £40,000 – whichever is the lower.
By diverting more of your income into your pension in this way, you save tax at your highest rate on the amount you pay in. Better still, you can carry forward any unused allowances from the previous three years, as long as you have been a member of a pension scheme during this time.
2. Check your tax code
The taxman doesn’t always get things right, and there have been many cases of individuals being allocated the wrong tax code. It’s important to make sure you have been given the right code – otherwise you could be paying more than you should. You can check your tax code at https://www.gov.uk/income-tax/check-youre-paying-the-right-amount
3. Put money in your ISA
You can save up to £15,240 for 2016 into a Cash ISA, a Stocks and Shares ISA, an Innovative Finance ISA, or any combination of the three. Any money paid in up to this amount is exempt from Income Tax and Capital Gains Tax whilst in the plan, and no tax is payable when you withdraw. But remember to use your annual allowance or you’ll lose it – anything you don’t use cannot be rolled over into the next fiscal year.
4. Talk to your spouse
If you are married or in a civil partnership, make sure that both of you make full use of your personal tax allowances and basic rate tax bands. If your spouse pays a lower rate of income tax than you do, you may find that moving savings and investments into a spouse’s name can reduce your tax liability. However this does mean you actually have to give away chunks of capital to your spouse, so you need to be sure he or she’s not going to take the money and run off with the milkman.
5. Make gifts
You can give away up to £3,000 each year without it being added to your estate for Inheritance Tax purposes. You can also give wedding gifts of up to £1,000 per person, rising to £2,500 for a grandchild or great grandchild, or £5,000 for a child.
6. Meet tax return submission deadlines
A no brainer, but not everyone manages to meet tax return submission deadlines. You will have to pay a £100 fine if you miss your self-assessment deadline, plus interest will start to accrue on any tax you haven’t paid.
7. Use your Annual Investment Allowance
If you are a landlord or business owner, you can offset an Annual Investment Allowance (AIA) of up to £200,000 on qualifying items bought for your business against your tax. Qualifying items include plant and machinery, tools and computers.
8. Carry forward any losses
If you are self-employed and have a really bad year, you can carry forward any losses from that year and offset them against profits from the next, bringing down your tax bill.
9. Claim your expenses!
Again, if you are self-employed, be sure to claim back your tax allowable expenses. They include a percentage of the running costs of a vehicle, your home office costs and the costs of running your business premises. Talk to one of our accountants if you’d like more advice on what you can claim for.
So there we have it – our top 9 tips for saving tax. If you’d like talk to a member of our team about making those tax bills smaller, be sure to get in touch.