Tax season is upon us, so to help you minimize your tax bill this year we have outlined 10 short tax tips that are guaranteed to make a difference.
1. Tax free savings for your children or grand children
- You can set up a Junior ISA for all of your children / grandchildren under the age of 18.
- You are able to make contributions of up to £4,080 pa into the ISA (for the 2015/16 tax year)
- The income and gains generated by the ISA are tax free.
- If you contribute the maximum amount from birth until the age of 18 your child / grandchild will have a £73,440 lump sum (plus accumulated interest)
2. Minimize tax on your company car
- The company car tax charge is based on the vehicles list price, CO2 emissions and the type of fuel. The lower the list price and CO2 emissions the lower the tax charge, although diesel vehicles which produce CO2 emissions.
3. Always check your tax code
- Your tax code determines how much tax is deducted from your salary
- If HMRC issue you with a wrong PAYE code (which is a regular occurrence!) you could be paying too much tax E.g. if you used to have a company car or other benefits, your code may not have been updated.
4. Making tax efficient investments
- Investing in private companies could qualify for relief under the enterprise investment scheme giving you 30% tax relief on your investment of up to £1 million.
- Investments can be risky though so always seek advice first.
5. Claim tax relief for worthless assets
- Where assets become worthless you may still be able to claim a capital loss.
- If the asset in question is a shareholding in an unquoted trading company you could claim income tax relief.
6. Accelerating tax relief on capital expenditure
- Pay careful attention to the timing of capital expenditure around your accounting year end to ensure you maximise capital allowances claims.
- Make short life asset elections for assets with an expected life span of 5 years or less.
7. Make gifts to reduce potential inheritance tax exposure.
There are some simple ways to give away wealth on a regular basis.
- Utilise your annual exemption and give away £3,000 pa
- If a family member is getting married you could give them £1,000 – £5,000 tax free.
- Make small gifts of £250 per person per year.
- Make regular gifts out of surplus income.
8. Claim tax relief for income losses
If you are self-employed and make a trading loss then you can:
- Offset it against any other income in the year so you don’t pay any tax.
- Carry it back against profits for the last year to generate a refund of tax paid (if you stop trading you could carry back up to three years.
- Carry forward against future profits.
9. Minimise your tax rate on a business exit.
- If you qualify for entrepreneur’s relief then you will pay tax at a minimum rate of just 10% on a sale of a business.
- Make sure you keep investment activities separate so that you don’t taint the businesses status.
- If you think you could sell out for more than £10 million thin about bringing family members into the business.
10. Make the most of tax relief for pension contributions
- You can receive up to 45% pension tax relief for this tax year (2016/17) when you make a contribution to your pension. Basic, higher and top rate taxpayers can benefit: the higher your rate of tax, the more you could receive.
- Top rate taxpayers receive 20% tax relief, and can claim back up to a further 25% through their tax return. With top-rate tax relief, a £10,000 contribution could effectively cost as little as £5,500.
If you have any queries on the above, or would like to discuss this in more detail, please contact Sarah Salton on 01925 761 600 or email her at firstname.lastname@example.org.