Everyone wants to save on taxes; if you can count yourself among those who have managed to take every possible tax break when filing your last return, then you should feel good about that — but don’t end it there. While those methods are certainly useful, you might find an even greater savings by doing some thoughtful planning throughout the year. The following are 25 ideas that can truly help pay off when it comes time to file taxes again.
Each year, make sure you’ve checked the tax code on your payslip. You might end up paying too much with the wrong code.
Keep in mind that the capital gains you make in the previous tax year that are under £10,600 are not taxed. Civil partners and married couples who have joint assets are permitted to claim double the allowance, meaning they can claim up to £21,200 without being taxed. CGT will be charged at 18 per cent for taxpayers who pay standard rates and 28 per cent otherwise. In the coming year, the allowance will rise £300 to a grand total of £10,900 per individual.
Tax return deadlines
For those looking to file through paper tax returns, it is important to remember that the deadline is 31 October. While it is possible to file taxes up to 31 January, remember that paper tax returns need to be submitted a full three months earlier or else you will be subject to a £100 fine.
Business owners and landlords may take advantage of the annual investment allowance through which they may claim capital expenditure on computers, tools and other items. Starting January 2018, you are permitted to seek relief for upwards of £250,000 every year.
Remember that those who are self-employed have business expenses that can be claimed as tax-deductible, which include cash expenditure if you are eligible.
Individuals who are starting a business of their own can improve their cashflow by picking an accounting year that ends early on in the tax year. This is because you can maximise the amount of time that separates you earning money and the final demand for taxes.
Self-employed individuals are free to claim the cost to run a vehicle, but they cannot claim the cost of purchasing one. In addition, if you also use the car for personal reasons, you are only permitted to claim a part of that whole cost.
Any losses that you received during the year as a self-employment business can be set forward another year and offset against the profits of that year.
Payments on account
If you believe you are going to earn less in the current tax year than you did last year as a self-employed individual, you can apply to reduce your payments that the HMRC might request you to make.
Consider estimated taxes
If you make a significant amount of money from investments or self-employment, this money is not subject to withholding. As such, you may wish to consider making estimated quarterly payments, or else you are likely to be subject to a penalty.
Residents who were born prior to 6 April 1948 may be eligible to receive an increased personal allowance, which means that they do not need to pay quite as high an income tax rate.
Those over the age of 65 can make donations through Gift Aid to charity to help reduce the taxable income down to below the threshold at which point you would lose out on allowances related to age.
Gift tax relief
For those who are in the higher tax brackets, it is possible to claim the difference between basic and higher rates of income tax with regard to Gift Aid donations.
If you are still working at your job beyond the retirement age of 62 for women or 65 for men, then be sure to cease making contributions to the National Insurance.
As a general rule of thumb, lifetime gifts are not typically added as a part of the estate for the purposes of inheritance tax if someone lives more than seven years after they game to be. PETs can reduce your residual estate.
Medically necessary items
Keep in mind that you can save by adding the cost of medically necessary improvements. This includes installations of wheelchair ramps, installing hand controls and others.
If available, use a pool car. Pool cars must meet certain requirements to avoid any taxable benefit under the law.
Season ticket loan
Ask your employer for a tax-free loan for a season ticket if you’re a commuter.
If available, consider using the company car. When available, you will be taxed, so you may as well use it and save on personal car taxes.
If you pay for childcare as an employee, you may be able to get a salary sacrifice childcare scheme for a substantial savings.
Opt for a low-emissions model if you are seeking a company car to use. Low-emissions cars are currently taxed for less than models that have a high CO2 rating, making it a useful tax savings.
You can pay to a pension scheme from your gross pay before tax charges.
Rent a room
If you have the space, you can rent out a room to get upwards of £4,250 of rent every year without having to claim taxes on it. However, this will only count if you rent out a room within your home that is also furnished.
Energy-saving allowance for landlords
If you choose to rent out your property, you are also eligible for claiming a special tax allowance. This allowance goes up to about £1,500 for installing a new hot water system, for draught proofing and for installing new insulation.
Timing the wedding
Those of you who have been preparing for a wedding near the end of the year may want to consider setting aside the romance for a moment to think deeply about the consequences that will occur on your taxes. In some cases, married couples pay more when filing jointly.
These are just a few of the many different ways in which you can save on your tax bill in the next week. With a few extra pounds in your hands, you’ll essentially give yourself a nice raise at the end of each tax year, all for just a little bit of extra effort throughout the year.