The question we get asked more often than any other is, ‘Can I reduce my tax bill?’ The simple answer is yes, and maybe. It’s not straightforward, and as a client we investigate the options for you, but there are a few extra ways you can keep the treasury starved of cash and within your control. We explore 5 here…
If you’re self-employed, don’t forget to claim all your tax-deductible expenses, including cash expenditure where eligible. So many people forget to include everything in their paperwork, and if you don’t claim you can’t gain. There are obvious items that you can’t, won’t, and shouldn’t be able to claim for, and conversely those that are allowable. It’s the grey bit in the middle which messes with your mind. We’ll allow what we think depending on your personal and business situation. Every case is different, and how do the government aim to deal with this in the new Digital Tax age? The proposed software won’t be able to cope with the legal uncertainties and will probably just disallow anything other than the ‘dead certs’. Take care and take advice when moving into this area of Making Tax Digital (MTD).
Use your tax-free Isa allowance. The annual limit is £20,000 for 2020/21. This can all be put in a cash Isa, all in a stocks and shares Isa, or split between both cash and stocks and shares.
So, what is an ISA? A savings account. Oh, and you can put your £20,000 into it a year and not pay tax on the interest. This is worth looking in to and if you can afford it, consider the option. Have a chat with our IFA about your own personal circumstances. It’s free, and a short chat might save you a few pounds on your tax liabilities. After all, keep it in your control, not the taxman.
Pay in to a pension scheme
Wow, this is a big topic and one for individual discussion. And it’s certainly not a decision to be made when you’re a few years from retirement. 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. That’ll help save some tax, but the whole topic revolves around the decision to take some disposable income now in exchange for a future uplift in income in later years. This will affect your current budget in some way, so consider that too. Tax relief will vary depending on your circumstances, so talk to us and our experts about pensions before making a decision. We will talk to you free and without obligation, and it won’t take long.
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. There are a few websites that give all the information necessary for you to make a decision. There’s more to buying a car than just its green credentials, but if your heart is set on it, use this site as a starter. http://www.nextgreencar.com/ Then check with us on how this will affect your finances.
Making donations to charity through Gift Aid can reduce your taxable income. You also don’t necessarily need records of donations as HMRC is expected to be able to get this through Gift Aid forms held by the charity. Another concession for taxpayers who give to charity is that you can donate now and have the tax relief applied to last year’s return. Normally any transaction you carry out today would affect the current tax year, not the previous one, but charitable donations are treated differently.
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