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tax saving

Tax Saving Ideas
Tax planning can be extremely complex and expensive. However, it doesn’t have to be, and everyone, young or old, rich or poor, can minimise their tax bills by simply using all the tax deductions and tax breaks available to them. Have a look at some of the ideas below. If your accountant has not mentioned these ideas, come and talk to us.

Personal Planning

  1. Make use of your personal allowance. Everyone with a tax adjusted income of less than £100,000 is entitled to a tax free income of £7,475 in 2011/12. Use it or lose it!
  2. Pension contributions qualify for tax relief. Basic rate tax relief is given at source so, for every £80 you pay the government contributes a further £20. If you are a higher rate taxpayer you will receive an additional 20% tax relief through your tax return.
  3. If you receive a tax return, make sure it is filed on time. If you want to fill in a paper return ensure you send in your return by 31 October. The deadline for doing it online is 31 January. The taxman raises millions every year by charging a £100 penalty for each late return.
  4. Older tax payers entitled to claim married couples allowance (at least one spouse or civil partner born before 6 April 1935) can transfer any unused relief to their spouse or civil partner.
  5. Have you made a claim for Child Tax Credit if you have a child under 16 or in full time education living with you?
  6. If you acquire a new source of income (for example, a rental property in the UK or abroad) don’t forget to tell the taxman as the consequences of not doing so can be costly.

Investments

  1. Do you take advantage of your annual ISA investment limit? You can invest up to £10,680 per annum and income and capital growth in an ISA is tax free.
  2. Consider transferring investments between your spouse or civil partner if you pay higher rate tax and your partner pays 20% tax.
  3. If you dispose of capital assets ensure that you utilise your capital gains annual exemption (currently £10,600) and that of your spouse or civil partner if applicable.
  4. If you are a non-taxpayer make sure that you receive any bank or building society interest gross without deduction of tax.
  5. Wealthier tax payers might like to consider the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) which offer generous tax incentives to subscribers.
  6. You can make contributions up to £2,880 per annum into a stake-holder pension for your children or grandchildren.  

Property

  1. Make sure you deduct all your expenses incurred in connection with any property that you rent out including any loan interest related to the property.
  2. If you make a loss on letting property, remember to offset it against future profits. Losses can be carried forward for up to three years where there is a gap between properties.
  3. You can claim an allowance of £1,500 per property on energy-efficiency expenditure including insulation.
  4. If you rent a room out in your own home, the first £4,250 of rental income you receive each year is free of tax.
  5. If you let out furnished property, you can claim 10% of the annual rent as an allowance for wear and tear on the furnishings.

Business Planning

  1. If your spouse or civil partner is not using their annual personal allowance and works in your business, you can pay them a salary. A payment up to £136 per week will not create an income tax liability or national insurance charge. The same applies to children aged 13 or over working in a family business.
  2. If you work from home, make sure you make a claim for a proportion of the mortgage interest and running expenses related to the non-exclusive use of the area of the home occupied by the business.
  3. Make sure you keep a receipt or a record of every penny spent wholly and exclusively for the purposes of your business as this will reduce your tax bill.
  4. Make sure you claim capital allowances. These will normally be available at 100% of the capital expended.
  5. Consider low CO2 emitting vehicles which benefit from more generous tax relief.

Inheritance Tax Planning

  1. Make sure you have drawn up a will. This is important for everyone, young and old, but particularly for families with children.
  2. Inheritance tax is charged at 40%. You have paid tax all your life. Don’t pay tax on your death!
  3. Remember to take advantage of the various inheritance tax allowances which enable you to transfer your wealth tax free. All gifts made more than 7 years before your death will fall outside your estate.

Employees

  1. Always check your tax coding notice and P60. They are often incorrect!
  2. Ask your employer to sign up to a cycle-to-work scheme so you can become fitter and save money!

 

Disclaimer
The tax saving ideas discussed above are provided for information purposes only and are of a general nature. They are not a substitute for specific professional advice related to your own circumstances. You are recommended to obtain specific advice from a professional accountant before acting on any of the information above.

Every endeavour has been made to ensure that the information above is up-to-date and accurate but we do not warrant that it is such and disclaim all warranties.