30 ways to pay less tax

If you need help with your tax questions, or any other aspect of your finances, contact us here at Botting & Co Chartered Certified Accountants on 01903 713508 or email info@bottingandco.co.uk.

1. Tax code
Check your using the right tax code. If you’re on the wrong code, you may be paying too much tax.

2. Capital gains tax allowance
Capital gains (2013) under £10,600 are tax-free. Married couples and civil partners who own assets jointly can claim a double allowance of £21,200. CGT is charged at 18% if you are a standard rate taxpayer, and 28% if you pay tax at a higher rate. For 2013-14, the tax-free allowance rises to £10,900 per person.

3. Tax return deadlines
If you want to make a paper tax return the deadline is the 31st October. You can do your tax online up to 31 January, but paper tax returns need to be in three months earlier than online tax returns to avoid a £100 fine.

4. Annual investment allowance
As a business, take advantage of the annual investment allowance (AIA) to claim for capital expenditure on items, such as, tools and computers. From January 2013, you can currently claim relief on up to £250,000 a year.

5. Tax-deductible expenses
Don’t forget to claim all your tax-deductible expenses, including cash expenditure where eligible.

6. Self-employed car costs
You can claim the running costs of a car and there are capital allowances that you may be able to claim on the cost of buying one. If you use the same car privately, you can claim a proportion of the total costs.

7. Cash-flow boost for self-employed
If you are setting up as self employed, you may be able to improve your cashflow by choosing an accounting year that ends early in the tax year. This maximises the delay between earning your profits and your final tax demand.

8. Annual losses
You can carry forward losses from one year and offset them against profits from the next, and in some circumstances losses can be carried back to obtain a tax refund.

9. Payments on account
If you are self-employed and expect to earn less in 2013-14 than you did the year before, apply to reduce any payments on account that HMRC ask you to make.

10. Rent a room
Rent a room relief is an optional scheme that lets you receive up to £4,250 in rent each year from a lodger, tax-free. This only applies if you rent out furnished accommodation in your own home.

11. Landlord’s energy-saving allowance
If you rent out property you can claim special tax allowance of up to £1,500 for insulation, draught proofing and installing a hot water system.

12. Landlord’s expenses
If you rent out property, you can deduct a range of costs before declaring your taxable income. These include the wages of gardeners and cleaners, and letting agency fees.

13. Tax relief on your mortgage
You can claim tax relief on the interest on a mortgage you take out to buy a rental property – even if it the rental property is abroad.

14. Reduce capital gains tax (CGT) on a rental property
Landlords are normally liable for CGT when they sell a rental property. If it has been your main home at some time in the past, you can claim tax relief for the last three years of ownership.

15. Isa allowance
Use your tax-free Isa allowance. In 2013-14, the overall limit is £11,520, of which £5,760 can be put into in a cash Isa.

16. No CGT on shares held in an Isa
There is no capital gains tax to pay when you sell shares or units held in an Isa.

17. Junior Isas
Use Junior Isas or Children’s Bonus Bonds to avoid being taxed on gifts you make to your own children.

18. Transfer assets
Transfer savings and investments to your husband, wife or civil partner if they pay a lower rate of tax than you do.

19. Children’s savings
Stop children being taxed at source on their savings by completing a simple form (R85) on their behalf.

20. Age-related allowance
If you were born before 6 April 1948, you may be eligible for an increased personal allowance. This means you pay a lower income tax rate.

21. National Insurance
Make sure you stop making National Insurance contributions if you carry on working beyond state retirement age (currently 62 for women and 65 for men).

22. Gift Aid
If you are over 65, making donations to charity through Gift Aid can reduce your taxable income to below the threshold at which you start to lose out on age-related allowances.

23. Tax relief on gifts
If you are in a higher tax bracket, you can claim back the difference between the basic and higher rate of income tax on any Gift Aid donations.

24. Inheritance tax
Lifetime gifts are not normally counted as part of your estate for inheritance tax purposes if you live for a further seven years after making them. Known as potentially exempt transfers (PETs) they can reduce your residual estate significantly.

25. Season ticket loan
If you are a commuter, check to see if your employer will give you a tax-free loan to buy your season ticket.

26. Pool cars
Use a pool car for occasional business travel, if your employer provides these.

27. Childcare schemes and tax credits
If you are an employee and pay for childcare, ask your employer if they have a childcare scheme. Salary sacrifice childcare schemes are easy to establish and can result in substantial savings for both employees and employers.

28. Company cars
If you are entitled to a company car, consider whether it would be more tax-efficient to take a cash equivalent in pay instead.

29. Going green
If you are changing your company car, consider a low-emissions model. These are now taxed at a lower percentage of their list price, than cars with a high CO2 rating.

30. Pay in to a pension scheme
Contributions to your employer’s pension scheme (including any additional voluntary contributions you make) can be made from your gross pay, before any tax is charged.

If you have any questions regarding any of the point above contact us here at Botting & Co Chartered Certified Accountants today on 01903 713508 or email info@bottingandco.co.uk.

Source of information for article: Which www.which.co.uk.

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