Businesses all over the country have no doubt been busy over the last few months, looking to plan their taxes in a way that could save them money once 5th April rolls around. The end of the tax year is traditionally a very busy time for businesses as they look to trim their tax bills – we’ve put together a few tips to consider that could help you become more tax efficient.
Many people paying the higher-rate of tax choose to use tax-free ISAs to become more tax efficient. If you’ve not already invested in an ISA at any point in this tax year, you still have until 5th April – you can save up to £15,000 cash tax-free in an ISA account.
You could also consider making an investment in your pension. Regardless of income, you can invest £3,600 per year in a pension, and you can also invest on behalf of a child or a non-working spouse. This method is even more tax-efficient than using an ISA, because the government has specified that you’ll get tax relief on the investment, rather than simply the income that the investment generates.
Check your tax codes, and keep HMRC up to date with any changes you’ve experienced in the last year. It’s one of HMRC’s more widely criticised policies, but they often issue incorrect tax code notices and attempt to take untaxed income via your tax code. However, if your income from these sources (property, or other income taxed at a lower rate) has fallen in the last year, you must let HMRC know, or face being taxed based on previously higher earnings.
The UK tax system has various loopholes and anomalies. For those whose income falls into certain brackets, there’s a chance they could be caught out by high rates of tax on 5th April. Those brackets are:
- Income falling between £50,000 – £60,000 due to child benefit
- Income which just exceeds the basic rate band of £41,865
- Income of over £100,000 – this sees a reduction in the personal allowance and a potential for a 60% tax charge
By analysing beforehand which of the brackets you may be liable to fall into, you can take steps to be more tax efficient and ensure you’re not paying more than you need to.
Capital Gains Tax
The capital gains tax exemption for 2014/2015 is £11,000. This means you can sell assets and make gains up to this amount before you pay any tax on the sale. If you’ve already reached your limit this tax year, consider selling any investments which may count as a loss – you can set this against your capital gain. It’s also worth noting that you can carry forward losses on investments and sales – they can be used to reduce any future capital gains tax bills you might be facing.
By following these tips, you too can be more tax efficient and ensure that you’ve used all of the allowances and reliefs available to you.
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