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.
We have found out that figures show Her Majesty's Revenue and Customs officials made almost 14,400 authorised views of "communications data" on taxpayers during tax evasion investigations.
This compares to more than 11,500 such views in 2010, which equates to a rise of almost 25 per cent, according to statistics released under Freedom of Information laws.
Using the Regulation of Investigatory Powers Act 2000, HMRC can access details on what websites are viewed by taxpayers, where a mobile phone call was made or received and the date and time of emails, texts and phone calls.
From October 2011 to the end of September last year, HMRC was given 172 authorisations for "directed surveillance", covert surveillance, mainly in public places. This had decreased from the previous year.
But critics today accused tax officials of pursuing wrong targets.
"HMRC should be focusing on the estimated £35bn lost tax, not snooping on hard-working people,” said Stephen McPartland, the Conservative MP for Stevenage who is campaigning for large companies to be more open about tax.
It is not clear how many times the surveillance has led to a successful prosecution for tax evasion or whether those found to be innocent are told that they have been spied on.
HMRC did not respond to requests for this information from the members of the press.
Officials also refused to disclose how many times it had been given warrants to intercept and read peoples' private emails, or listen to their phone calls.
This is the most intrusive type of surveillance, which needs to be authorised by the Home Secretary.
It also refused to disclose the number of times it had carried out "intrusive surveillance", which can include covertly filming a person's house, or bugging their property or car.
An HMRC spokesman said: "Tackling serious organised crime is a priority for us and access to communications data and directed surveillance have a vital role to play in meeting that challenge.
"In 2011 communications data enabled us to prevent £850m of tax revenue being diverted into the pockets of fraudsters.
“Our use of these powers is subject to regular independent inspection, ensuring it is both proportionate and lawful."
Fortunately at Tax Affinity Accountants we are authorised HMRC agents and can quickly and effectively help in all matters investigations and penalties.
Also read this article in the Telegraph. Tax Affinity Accountants are the small business experts, helping the public in grow their businesses in Surbiton, Surrey.
You should act as soon as possible to avoid tax penalties. As HMRC are becoming increasingly aggressive in enforcing penalties.
The tax return deadline is 31st Jan 2013 and all self employed people can be fined £100 for late submission in the first month then after that a daily charge of £10 on top of all previous fines. Which if can easily become £380 after just 2 months. Or simply £680 if it is 3 months overdue.
This rule applies even if there is no tax to pay or the tax they owe has been paid!
Uniquely however, this year the taxman has offered taxpayers a small extension of 2 days before imposing penalties. This is because of a strike by its call centre staff which meant HMRC would not be able to handle a similar volume to last year.
At Tax Affinity Accountants, we see far too many people each year who loose a huge amount of hard earned money to fines. While we are experts in Tax and can in many cases successfully appeal for discretionary discounts on fines, the fines are not normally completely cancelled by HMRC especially when they have already given a 2 day extension.
So we recommend that all local businesses and self employed people make sure to have their tax returns submitted as soon as possible well before the 31st Jan 2013 deadline.
At Tax Affinity Accountants we are an authorised HMRC agent and are very experienced in all types of Tax eg Self Assessment, Corporation tax, PAYE, VAT, Personal Tax, Construction Industry Schems (CIS) to name a just a few and would be happy to help local people resolve their tax issues.
For more useful information about accounting and tax accounting issues in Kingston upon Thames visit www.taxaffinity.com/blog
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