Robert A. Heinlein once declared in The Moon is a Harsh Mistress: “There is no worse tyranny than to force a man to pay for what he does not want, merely because you think it would be good for him.”

And so, here we have taxes. It doesn’t have to be all that bad though. Allow us here at Neil Smith Accountancy to enlighten you with ten fantastic tax saving tactics.

Digitalise 

From April 2019, Making Tax Digital came into effect; all records need to be kept digitally and your VAT tax returns provided  to HMRC via a Making Tax Digital compatible software, also known as  an MTD. Should your system not be compatible, it’s highly likely that you will be unable to to provide your VAT returns and run the risk of experiencing VAT surcharges. 

Learn about the  Enterprise Investment Scheme (EIS)/Seed Enterprise Investment Scheme (SEIS)

Who doesn’t love a tax break? The mentioned schemes provide some very generous tax reliefs that come in the shape of income tax refunds, free inheritance tax for investors and free capital gains tax. Should you choose to invest in an SEIS registered business, you have the opportunity to claim a 50% return on every investment back against any income tax you’ve already paid. 

Utilise the £20k tax efficient investment allowance

If you’re aged 18 years or older, you’re able to contribute up to £20,000 in stocks and shares. The ISA taxes this year-on-year so there’s no UK capital gains tax or UK tax to pay on these investments. Although created for long term saving, you can withdraw funds if this is a priority. 

Review your pensions and consider making a contribution

Make your golden years all that more golden as pension contributions currently enjoy a 45% tax relief. The numbers: a £1000, self-invested pension or SIPP reaps the rewards of a 20% basic tax relief, or £250 added instantly. Payers in the higher tax bracket are able to claim up to another £250 with the 45% tax payers are able to claim up to £312.50.

If you don’t understand your employer obligations with regard to workplace pension contributions, find out more in our blogpost which explains what you are required to provide for your employees.

Reduce your bill through corporate tax relief

Claim £230, even though you’ve only spent £100 – sound too good to be true? Not with corporate tax relief. Usually, when your business sustains a legitimate business expense, wholly for your trade, you’re permitted to claim 100% of these costs against your business income to minimise your tax bill. 

Save £4,800 through IHT planning

A sensitive subject, death is something we as humans, as a rule, dislike to talk about. Buy hey, there’s also a bright side. Gifts of no more than  £3,000  each year can be made free of inheritance tax. Unlike other taxes, this limit increases  £6,000 if the year’s  inheritance wasn’t used.

Take advantage of your income tax allowances

Claim £230, even though you’ve only spent £100 – sound too good to be true? Not with corporate tax relief. Usually, when your business sustains a legitimate business expense, wholly for your trade, you’re permitted to claim 100% of these costs against your business income to minimise your tax bill. 

Use capital allowances

Individuals are allowed to claim tax free capital gains allowance of up to £11,700. It’s a case of ‘use it or lose it’. Before and after the tax year, if it’s sensible to sell some of your investments. Why, you may ask? It comes down to the fact that you have the opportunity to utilise two allowances and suspend the tax on the second sale until January 2021.   

Claim often overlooked expenses

These include:

  • Home office use
  • Use of home as office
  • Lease premiums
  • Warranty provisions
  • Where the value of items in stock are worth less than they cost. Analyse your income recognition policy

If you usually accept payment before carrying out work, these payments should be shown in your books when you’ve completed the work, having been matched with the costs of performing the task.

So, the murky and unglamorous world of taxes doesn’t have to be a foreboding one.  Luckily, if you have any questions,the professional team at Neil Smith Accountancy are on hand to help you every step of the way. 

Head to our contact page to arrange a chat with our friendly team. Alternatively, you can call on 01376 512 637 or email enquiries@neilsmithaccountancy.co.uk.