Tips for Efficient Savings and Investments There are a range of methods for saving and investing your money more effectively. Summarised below are several straightforward ways to obtain tax-free returns and reduce your tax bill. National Savings and Investments National Savings and Investments are backed by the Treasury and thus offer a secure method of saving and investing your money. The tax free savings and investments products currently offered from National Savings and Investments include:
Tax-Free Interest on Savings Interest from your savings in banks and building societies is usually taxed at 20%, but you may be able to register to receive gross (untaxed) interest if your taxable income is within your tax-free allowance. You can also claim back tax paid unnecessarily on savings in the past. ISAs (Individual Savings Accounts) An ISA is a financial product, introduced in the UK in 1999, to allow tax-favoured savings and investment accounts. They can be used to save cash (Cash ISA) or to invest (Stocks and Shares ISA). One can invest a maximum of £11,520 into an ISA in the tax year 2013-14, of which £5,760 may be saved in cash. The remaining sum may be invested in a range of financial products:
No tax is paid on the interest or dividends received from an ISA and profits from investments are exempt from Capital Gains Tax. Junior ISAs Similar to standard ISAs, Junior ISAs offer tax free savings for any child under the age of 18, providing they are not eligible for a Child Trust Fund (CTF) account. The upper limit for a tax free Junior ISA in 2013-14 is £3,720, and once again there is no tax on interest or dividends. However, as with CTFs, the money is locked into the ISA until the child is 18. Child Trust Funds Only eligible for children born between 1st September 2002 and 2nd January 2011, CTF accounts can be paid into by parents, family and friends up to a limit of £3,720 tax free for 2013-14. Once again, the money in the CTF account cannot be accessed until the child is 18 years old. Pension Contributions Taxpayers are encouraged by the government to make contributions to pension schemes by offering tax relief on any such payments. Once you retire, you will ordinarily be able to claim 25% of you pension fund as a tax-free lump sum, and then your pension will be taxed in line with standard income tax rates. Savings in pension schemes are unlimited up to 100% of your earnings each tax year and thus offer an effective method for reducing your tax bill. By Tom Hoadley. To read more interesting and informative articles by this and other writers visit www.taxaffinity.com/blog. Tax Affinity Accountants are experts in Tax and Accountancy for small businesses and help business across the UK and those abroad that have an interest in the UK. Visit www.taxaffinity.com for more details. Please feel free to comment and share this with your friends.
0 Comments
Every year many people across the UK get a tax credits renewal pack. If you do get one you need to check your renewal forms and make sure you pass on the correct information to the Tax Credits Dept.
This article can help you find out some of the information you need to check, how to work out your personal income(s), and how to avoid common mistakes. Check the information presented Renewal packs usually include the an Annual Review notice (TC603R) plus an Annual Declaration form (TC603D or TC603D2). And everyone needs to renew by 31 July or whatever date is shown on letters from HMRC. A tax year runs from 6 April one year to 5 April the next. The important information that you need to check on your Annual Review notice is:
If there is anything incorrect you must tell HMRC straight away. Especially if anything is wrong on your notice or if anything has changed and they have the wrong information. If previously you have claimed tax credits as a single person - or as a couple your notice should say this, a couple is known as a 'joint' claim. You should be making a 'joint' claim if you are:
Your form should also show the country you live in most of the time. It doesn't matter if you sometimes go to other countries for holidays for up to 8 weeks (and in some cases up to 12 weeks) as this is usually still allowed. And you may also be able to get tax credits if you live outside of the UK for a valid reason. But you will need to confirm these extra conditions with HMRC before applying for them. Your work or benefits should also be reported, showing the country you work in most of the time with the number of hours a week you usually work. It can also show you if you got any benefits, for example Income Support or Employment and Support Allowance. If you have any disabilities your notice will explain if you were paid the disability part of Working Tax Credit. This also applies to severe disabilities and their allowances receivable. If you have a child or children then your notice should show the correct information about them. You can usually get Child Tax Credit for a child up to 20 years old, with the conditon that they are in full-time education or an approved training course. And if you work are working at least 16 hrs per normal week and have to pay for a registered or approved child minder or carer, you may be able to get an extra Working Tax Credit payments to help with these costs too. How to work out your total income for your Annual Declaration It is worth noting that some social security benefits are taxable, such as contribution-based JSA (Job Seeker's Allowance), and as such they will count as income when you make a tax credits claim. Other types such as Disability Living Allowance, don't count as income. So be careful to be sure if your benefit is taxable. If your not sure ask rather than guessing and getting the claim incorrect. If you're in employment, you should have a P60 from your employer at the end of the tax year (5th April), which will show your earnings and tax paid for the whole tax period (6th April to 5th April). You need to include income from all types of jobs you have had in the tax year so it may need several P60's for filling it in. If you cannot find your P60, then don't worry as most payslips usually show a running total of all earnings and tax paid for the year. If you still cannot get the full information you can provide an estimate but make sure to give the actual income figure no later than 31 January or again it can mean having to pay tax credits back at a later date if you've claimed to much. You must also remember to add in:
If you're self-employed your income will be the net profit you made in the tax year. If you haven't had a profit or loss drawn up prior to sending in your tax return, then you will need to give an estimate of your profit and again you must provide an actual by the 31st January or you may have received too much or less in Tax Credits. If you made a Net Loss on self employment, just give a figure of zero. But please do note if you had any other income during the year, you can take the loss off this income. Be careful to get the best advice and support Bear in mind that other income like pensions, shares, income from property (sale or rental), income that you receive from abroad and savings need to be also declared. If in doubt the best thing to do is ask a professional as the self employment and other incomes can become a bit tricky and you could end up claiming less or more than your due. Tax Affinity Accountants are experts is tax and accountancy. Based in Kingston upon Thames they cover the whole of the UK and help make sure clients get the correct amount of tax credits for their situations. Visit www.taxaffinity.com for more information or if you feel you need help in filling in the forms. Follow Tax Affinity on twitter at @tax_affinity to find other useful tips and advice. In the current economic climate everyone should be looking for ways to save tax. And to help, we at Tax Affinity Accountants have compiled a list to do just that.
The tax codes, allowances and deadlines 1. Tax code Check your tax code each year (the numbers and letters on your payslip). If you're on the wrong code, you may be paying too much tax. 2. Capital gains tax allowance Remember that capital gains 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. 3. Tax return deadlines Don’t miss the 31 October deadline if you want to make a paper tax return. 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 If you are a landlord or run your own business, take advantage of the annual investment allowance (AIA) to claim for capital expenditure on items such as tools and computers. You can claim relief on up to £25,000 a year. How to pay less tax if you're self-employed 5. Tax-deductible expenses If you’re self-employed, don’t forget to claim all your tax-deductible expenses, including cash expenditure where eligible. 6. Self-employed car costs If you're self employed, you can claim the running costs of a car, but not 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 If you are self employed, you can carry forward losses from one year and offset them against profits from the next. See our page on when the self-employed pay tax for more. 9. Payments on account If you are self-employed and expect to earn less in 2012-13 than you did the year before, apply to reduce any payments on account that HMRC ask you to make. Saving tax on property income 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. Pay less tax on savings and investments 15. Isa allowance Use your tax-free Isa allowance. This year, the overall limit is £10,680, of which £5,340 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. For more details see Tax on savings and investments. 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. See our guide to tax and your partner for more information. 19. Children's savings Stop children being taxed at source on their savings by completing a simple form (R85) on their behalf. Tax savings for older people 20. Age-related allowance If you are aged 65-plus you may be eligible for an increased personal allowance. This means you pay a lower income tax rate. See Tax in retirement. 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. See our blog on inheritance tax. Tax savings through employee benefits 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. For more details see working for an employer. Child tax credits can also save you money. 28. Company car? 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. For the most up to date and accurate advice speak to tax accountant, as these allowances and benefits do change every year. Tax Affinity Accountants are expert Qualified Tax Accountants in Kingston upon Thames. To read more visit www.taxaffinity.com/blog and please feel free to comment and share this with your friends. |
Various AuthorsOur experienced accountants and tax advisers provide valuable insights into practical every day questions and issues. Archives
March 2024
Categories
All
Ask your own question: If you would like to have a tax related question answered here, please send your question to info@taxaffinity.co.uk. |