5 Easy Tax Saving Tips
Posted by aartis on September 7th, 2016
1. Claim all allowances and expenses.
The most important issue after maximising your income is to maximise your tax deductible expenses. If you run your own business then you can offset all costs that are 'wholly and exclusively in the course of your business' in order to legitimately reduce your taxable profit. You should also make use of the current capital allowance rules to offset the cost of equipment you have purchased in order to run the business. It is also possible to claim for expenses incurred in setting up the business. If you are employed then the allowable expenses you can claim are nowhere near as generous but you can still claim for the cost of membership of a professional organisation and, in some circumstance, for the cost of working from home. And you should not forget that, if your P11D shows an amount of reimbursed expenses, you must claim the actual cost of the expenses against this on your personal tax return or you will be taxed on the amount reimbursed.
2. Check your tax code.
The PAYE system generally works efficiently for employed taxpayers but you should still check your tax code regularly particularly if you have changed your circumstances recently. There may be many reasons why your tax code is different from your colleagues but simple human error still remains one of them and a little understanding and checking can avoid problems and potentially save you overpaying tax. The time limit for claiming back overpaid tax is now four years rather than the previous seven, so do not delay in checking out any inconsistency.
3. Review your affairs annually.
Circumstances change as do tax regulations and it is easy to let things drift to your disadvantage unless you regularly review your situation. For example, HMRC will often write to higher-rate taxpayers telling them that they no longer need to complete a self assessment tax return as any adjustments can be made through their tax code. That is fine as long as nothing changes but, should you make a gift aid donation to a charity or make additional payments into a pension, then you will not automatically obtain the tax relief due. So, in some cases, taxpayers may lose out on refunds simply because they no longer complete a tax return each year. A regular check of your affairs ought to save you missing out.
4. Maximise your savings.
There are tax-efficient savings schemes available and you ought to make use of them if you have received savings interest. Please make sure you do your research well as any scheme needs to be effective in generating income as well as saving tax. If the fund or savings scheme makes no profit, then the tax saving is zero and you would be better off leaving the money in the bank or building society. If you are self-employed and have a tax bill to pay twice a year (on 31st January and 31st July) then you might want to consider an offset mortgage so that you can lower the interest paid on your mortgage as you save towards the tax bill. As long as your mortgage rate is higher than your savings rate, this could work to your advantage.
5. Get professional advice.
Some of the advice offered above can be implemented by some simple personal discipline. But for a complete review of your situation, you should consult an expert. If you run your own business, an accountant ought to be able to help you to save tax by claiming all allowable expenses, and ensure your affairs are structured in as tax-efficient manner as possible. Similarly, if your tax saving affairs is at all complex (say you are non-resident, non-domiciled or have several employments) then advice in completing your tax return may well save you tax. An Independent Financial Advisor can also help with investment and pension issues. I would strongly advise you to find a trusted advisor and see how they can assist.
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