With the end of the tax year just gone, it’s important to consider how you can cut down on your liability in the future – whether you’re employed or self employed, there are ways in which you can structure your tax and set your accounts up to avoid facing a nasty shock when it comes to your final bill. There’s several ways in which you can achieve this, or at least try to reduce the amount of money that you’re going pay at the end of the year. These ways include:
1 – Checking Your Tax Code if You’re Taxed Through PAYE
Most people pay their tax as an automatic deduction every month from their wages – if you don’t check your wage slips on a regular basis, it’s easy to miss when you get the wrong tax-code – this can occur if you’ve moved into a new job and your tax details haven’t been carried over. In some cases, you can be hit by emergency taxes if you’re working on a temporary or seasonal basis. Keep your past wage slips, and contact HMRC to get confirmation on your correct code.
2 – Remember to Keep Records of Expenses
Being self insured can be tough – you need to keep track of your taxes owed throughout the year, while paying Class 2 National Insurance, and preparing for Class 4 National Insurance on business profits; make sure that you keep all financial records, and work out expenses – if you work from home, you can claim £4 a week without records. You can also claim for home expenses like electricity and Internet if you can break down how much is being used for your business.
3 – Take Out an ISA
One way in which you can save on your taxes is to set up an ISA account with your bank or other provider – for 2013-2014, you can put away about £5,760 in cash without being taxed on it; doing so is a good way of building up a regular amount of savings at competitive interest rates.
4 – Use Gift Aid
Any charity payments can be used to offset your tax owed by claiming back the difference between the basic and the higher rate of income tax on what you pay; if you have a direct debit or standing order to a charity or charities, ensure that you keep records and can work out how much you’re able to claim.
5 – Make Sure You Get Relief on Your Pension Contributions
Regardless of whether you’re paying into a private or a company pension, look into where you can claim tax relief on your payments; most pension contributions that aren’t made through your company’s payroll can be broken down to claim relief up to a certain percentage.
6 – Work Out Capital Gains Savings
At present, you can make capital gains profits up to a threshold of £10,600 without paying tax – this figure is continuing for the 2013-2014 tax year. If you do go above this, you’ll pay 18 per cent at a basic rate, and 28 per cent on a higher rate. Try to spread your gains to prevent going over this limit if you’re close to it.
7 – Claim Tax Benefits and Credits
While benefits and credits are being cut as part of Government austerity measures, there’s still a wide range of deals that you can sign up to – Working Tax Credit and Pension Credit, as well as Housing Benefit, are useful ways of reducing your liability, with other forms of relief including Child Benefit, Disability Living Allowance, Maternity Allowance, and Winter Fuel Payments for those over a certain age.
8 – Transfer Spousal Assets
If you’re married, you can split your assets to avoid paying higher rates of tax on your capital gains; for example, by dividing assets and payments between you and your partner, you can raise your combined threshold to about £21,000.
9 – Trading Losses
When self employed or freelance, you can claim trading losses against your income if your business has suffered a decline from year to year; speak to an accountant about how much you can claim, with different rules available for landlords and rental losses, as well as for companies that are reporting losses.
10 – Don’t Get Caught Out by Fines
Make sure that you don’t end up paying needless tax fines – always ensure that you file your self assessment tax return by the 31st of October for paper forms, and by the 31st of January the following year for online forms. Similarly, notify HMRC of any profits or changes to your business, and when you become self employed, register to pay Class 2 National Insurance payments to avoid fines.
About the Author: Thanks to MartinBrook Business Services for his contribution today. If you’re looking for an Ipswich Accountant then please visit MartinBrook.co.uk for more information on the services that they provide.