As the end of the tax year looms it’s a good time to make sure you’re minimising the amount of tax that you pay and take advantage of all the allowances that are available to you. Remember, most allowances apply to one particular tax year – and once it has ended the allowances are lost. That’s why Thursday April 5th is such an important day.
To help you save tax and use your allowances, we’ve listed 10 tax saving tips below. We do of course incorporate tax planning within our Wealth Management service, but if you have any questions just give us a call on 01425 279212:
1. Use your ISA allowances. For the tax year ending in April 2012 you are allowed to invest up to £10,680 in an Individual Savings Account (ISA), with a maximum £5,340 going into a cash ISA. For the 2012/2013 tax year these figures increase to £11,280 and £5,640 respectively. Investments in ISAs are free of income tax and capital gains tax.
2. Remember to use your other allowances as well, particularly your capital gains tax allowance. For the current tax year everyone is allowed to make gains of £10,600 free of tax, giving a husband and wife a combined allowance in excess of £21,000. In our experience, people don’t use their capital gains tax as much as they should in tax planning.
3. Check your tax code. If you’re unsure what your tax code is, it normally consists of one letter and a few numbers, and for most people, multiplying the numbers by 10 will show you how much you can earn before you pay tax. However, it’s fair to say that HMRC frequently make mistakes with tax codes, and if yours is incorrect you could end up paying too much tax.
4. Make use of your pension. Pensions can be used to make tax efficient contributions and can help to reduce your tax bill. Give us a call if you have any queries and we haven’t already discussed this area.
5. If your spouse doesn’t work – or earns less than the annual personal allowance – you should consider moving assets into his or her name. This is a perfectly legal and perfectly sensible tax planning move: we can advise on how to do this.
6. It’s important to remember that your children have allowances as well, both personal and for CGT. They can be employed in a family business and also have the normal CGT allowances – so it can make sense to move assets in to your children’s names, especially if the value of those assets is likely to increase.
7. Remember that interest paid on bank and building society deposits will have tax deducted at 20%. If you do not pay tax then you can sign a form to have the interest paid without the deduction of tax. Alternatively, you can submit a repayment claim to HMRC.
8. Be aware of crucial dates in the ‘tax calendar.’ The most obvious – and widely reported one – is the self-assessment deadline, but there are other crucial dates throughout the year which you need to be aware of, especially if you are running a business.
9. Plan for Inheritance Tax. With the threshold for inheritance tax going up many people have been taken out of the IHT net, but for those that are still liable for this tax, it’s one area where a small amount of planning can go a long way. Even something as simple as making a will could save you thousands of pounds.
10. Finally, work closely with us. We’ve all got to pay our taxes, but work with us and we’ll make sure you pay as little as possible!
Sources: Check your tax code http://www.moneysavingexpert.com/family/check-tax-code General: http://www.thetaxguide.co.uk/top-ten-tax-saving-tips.html