Are you using all available tax allowances to avoid paying unnecessary tax?

By David Lamb CFP™ MCSI

Nobody likes to pay unnecessary tax but are you taking advantage of all available methods to reduce your tax bill legally?

With careful planning, you can:

  • Reduce your income tax
    • Is your tax code correct, can you claim tax credits and anything from the marriage allowance or pay into a pension? You should also ensure that you meet the tax return deadline and reclaim any overpaid taxes.
  • Gain employee tax benefits
    • These could include a season ticket loan to reduce travel costs, claiming tax free childcare, switching to a low emissions company, or (my personal favourite) buying a bike on the right to work scheme.
  • Cut tax on your savings
    • This can include maximising your personal savings allowance, making the most of your ISA allowance, using the starter rate for savings.
  • Use tax deductible expenses (if self-employed)
    • Reclaiming the running costs of a car when used for business, changing your accounting year end to help with cash flow, carrying forward annual losses to offset against profits from a more successful year.
  • Cut tax on your investments
    • This may include maximising your dividends, using your capital gains tax allowance (and avoid CGT it by investing in ISAs), transferring assets to a spouse, investing in junior ISAs and switching investments to capital boosting investments. For the more adventurous, investing in enterprise investment schemes or venture capital trusts may be an option, along with bank shares through your company.
  • Save property income tax
    • By using the rent a room relief or claiming landlord’s expenses.
  • Save inheritance tax
    • This has been described as a voluntary tax paid by those who dislike their children even more than they dislike the Inland Revenue. A lot of potential tax can be saved with good planning.
  • Make charitable donations
    • Doing this via gift aid can help if you are subject to higher or additional rate tax. The charity can also benefit from reclaiming tax on the donation.

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