Ten top tips for reducing your tax bill
Keeping your tax bill to a minimum is not a matter of aggressive or complex tax schemes, but rather of identifying which tax reliefs and allowances specifically granted by law, are available to you. Sensible tax planning is an essential in making the most of your finances and helping your business’s profitability.
Here are our 10 top tax saving tips.
1. Invest in an ISA
Up to £11,520 can be invested in an ISA in 2013/14, £23,040 for couples. Most income accrues tax-free, although the tax credit on UK dividend income cannot be recovered. All investments held in ISAs, including the new Junior ISAs are free of CGT
2. Maximise personal allowances…
Ensure that you are making the most of your tax-free personal allowance (PA). If your spouse or partner has little or no income, consider transferring income (or income-producing assets) to them to ensure that they are able to make full use of their PA. Any transfer must be an outright gift with ‘no strings attached’.
3. Pay into a pension scheme
Invest in a company or personal pension scheme and gain tax breaks on your personal pension contributions.
4. Use your capital gains tax (CGT) allowance
Make the most of your CGT exemption limit each year (£10,900 in 2013/14). It may be possible to transfer assets, quickly or over time, depending upon the size of your asset holdings, to a spouse or civil partner or hold them in joint names prior to any sale to make full use of exemptions.
5. Write a Will and keep it up-to-date
A well-drafted Will can ensure that any wealth you have built up during your lifetime can be structured to save tax. However, you must review it regularly to ensure it reflects changes in family and financial circumstances as well as changes in tax law.
6. Utilise inheritance tax (IHT) exemptions
You should take a careful look at your inheritance tax planning and make the best use of IHT allowances, including the annual exemption, which allows you to give away cash or assets up to a total value of £3,000 a year without incurring any taxes.
7. Go for green transport
Switch to a ‘green’ company car with low CO2 emissions and reduce your tax liability, as such vehicles are taxed at a lower percentage rate.
8. Rent out a room
Under the ‘rent a room’ scheme, income from letting furnished rooms in your main residence is exempt from tax if the gross annual rent does not exceed £4,250 (£2,125 if you share the income).
9. Review your capital expenditure to maximise claims for capital allowances
10. Review your business structure
The structure of your business can have a significant impact on your annual tax bills. If a sole trader or partnership, explore the tax advantages of registering as a limited company.
Adrian has a perceptive understanding of our financial situation, gives common-sense advice and is skilful in steering us in the direction he knows to be most suitable for us.Mr & Mrs S - Solihull