How Having A Tax Plan Can Save You Money
There are only 2 things that are certain in life – death and taxes. But while you can’t do too much about death, there are some things you can do during your life that will reduce the amount of tax you need to pay. There are a lot of ways to reduce your tax bill legally, whether you’re an employee, self-employed, a landlord, investor or even a pensioner. All it takes is a little effort to boost your take-home earnings and cut your tax bill. Today we wanted to talk through just a few of the options you have, strategies you might use, and how to take advantage of tax relief and government schemes you might not know about.
Check Your Tax Code
This is such a simple thing, but it can make a really big difference. Your tax code tells HMC how much tax to collect from your salary – and making sure it’s right is essential. You can find your tax code on your pay slip. Check it at least once a year, or after changing jobs, to make sure it’s right for your current situation. If you’re on the wrong tax code, you might be entitled to pay less tax in the coming months, or even receive a refund. You can find out what all the tax codes mean here.
Reclaim Overpaid Taxes
If you’re a non-taxpayer, or if your income has fallen unexpectedly during the course of a year, then you may have paid too much to HMRC. This is mainly because HMRC assumes your persona allowance is equally used each month, unless you tell them otherwise. If this applies to you, then you are entitled to claim any overpaid taxed back, giving you a nice little cash boost. And all you have to do to reclaim it is fill out form R40 from HMRC, or call them directly
Pay Into A Pension
Pensions are a great way to save for your future, but did you know it can also help reduce the tax bill? Contributions to your employer’s pension scheme (including any additional voluntary payments you make) can be made from your gross pay, before any tax is charged. On top of that, the government will top up your pension with tax relief, giving you a free bonus for your retirement savings. The exact amount you could save will depend on a few things, but pretty much everyone can save something. Our team can help you work out how much you could save, if you want to know more.
Maximise Your Personal Savings Allowance
Every year the government allows you to earn a certain amount of interest on your savings, completely tax-free. In 2019-20, that’s £1000 in interest, if you’re a basic-rate taxpayer. If you’re a higher-rate taxpayer, then the amount goes down to £500. This means you will only pay tax on any savings interest above this amount. But this is no longer automatically deducted by the savings provider – you have to pay it via self-assessment or have it deducted via PAYE. By moving money into savings if you’re under this £1000 interest earned normally, you can maximise the amount you earn without paying a penny more in tax.
Understand Tax Deductible Expenses For The Self-Employed
If you’re self-employed, then managing your taxes suddenly becomes a bit more complicated. And while there are a lot of options out there to reduce your tax bills, one of the best things you can do to reduce your (and your businesses) tax is understand what expenses can be deducted. When you look into it, many expenses incurred while running your business can be deducted from your profits, reducing your overall tax. This could include things like fuel, phone costs, or running costs for your home office. Take a look at a guide like this one to find out what you can deduct, and make sure you do!
At Chilvester Financial we understand that no one wants to pay more tax than they have to. Our financial advisors are on hand to ensure you’re in the best financial position possible, so you can enjoy your life and achieve your goals. Whether that’s understanding what your current position is, or knowing how to make the most of tax breaks, we provide advice plans and products that will help you get to where you want to be. If you want to find out more, just get in touch with us today.