Christmas is coming to G W Dick & Co so we are counting down by offering daily Tax Saving Tips and Advice on Twitter and Facebook. We hope you find some of them useful. Wishing you a very Merry Christmas from all at G W Dick & Co. If you would like to read all 24 tips now then continue reading below.
1. Making Tax Digital
Making Tax Digital for VAT starts on 1st April 2019 and all VAT registered businesses (with a turnover of over £85,000) will have to keep digital records and submit VAT returns direct to HMRC from those records. Make a New Year’s resolution to speak to your Accountant in January 2019 to make a plan to ensure that you comply.
2. Top up your pension
For the tax year 2018-19, you can get tax relief on pension contributions up to 100% of your earnings, or £40,000 – whichever is the lower. By contributing more of your income into your pension, you save tax at your highest rate on the amount you pay in. If you have your own company, that company can make an employer contribution up to £40,000 for you instead.
3. Get the right tax code
Check your tax code each year. If you have been allocated the wrong tax code, you may be paying too much tax. You can check your tax code at https://www.gov.uk/income-tax/check-youre-paying-the-right-amount
4. Put money in your ISA
You can save up to £20,000 for tax year 2018-19 into a Cash ISA, a Stocks and Shares ISA, an Innovative Finance ISA, or any combination of the three. Any money paid in up to this amount is exempt from Income Tax and Capital Gains Tax whilst in the plan, and no tax is payable when you withdraw. But remember if you don’t use your annual allowance within the tax year it’s lost forever – anything you don’t use cannot be rolled over into the next fiscal year.
5. Transfer assets
If you are married or in a civil partnership, make sure that you are both making full use of your personal tax allowances and basic rate tax bands. If your spouse pays a lower rate of income tax than you do, it may be beneficial to move savings and investments into your spouse’s name to reduce your tax liability.
6. Make gifts
You can give away up to £3,000 each tax year without it being added to your estate for Inheritance Tax purposes. You can also give wedding gifts of up to £1,000 per person, rising to £2,500 for a grandchild or great grandchild, or £5,000 for a child.
7. Self-employed car costs
If you’re self-employed, you can claim the business proportion of your car running costs.
8. Rent a room
Rent a room relief allows you to receive up to £7,500 in rent each year from a lodger, tax-free and applies if you rent out furnished accommodation in your own home.
9. Incorporating your business
Think about incorporating your business – although recent changes have made this less attractive than previously, lower corporation tax rates may still make it worthwhile to become a limited company.
10. Landlords expenses
If you rent out property then you are allowed to deduct a range of costs before declaring your taxable income. These include the wages of gardeners and cleaners, property repairs and letting-agency fees.
11. Tax relief on your buy-to-let 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, but not if you live in it yourself.
12. Pay yourself efficiently
The amount you pay yourself from your limited company impacts on the amount of tax you pay but how you pay yourself has an impact too. Salary, dividends, benefits in kind, pension and loans all need to be considered on an on-going basis, and you should consult with your Accountant as to how best to structure this for you.
13. Be organised
Even if you don’t want to spend time doing bookkeeping yourself, you can help make sure you are claiming for everything you are entitled to by keeping copies of everything.
A common reason for HMRC to disallow expense claims or input VAT amounts is a failure of the business to keep proper supporting records. Don’t fall into that trap.
14. Spend more time on your business
Are you the best person to take care of your bookkeeping and VAT returns?
Your business will benefit from you spending time working on the business, and letting the bookkeepers and accountants do what they do best. Although you may think you are saving in accountants fees, you are probably losing out by not claiming for everything you are entitled to, and spending time dealing with admin where you could be earning instead.
15. 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. They are known as potentially exempt transfers (PETs) and they can reduce your residual estate significantly.
16. 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.
17. Structures and buildings allowance
The 2018 budget introduced a brand new tax relief for expenditure on construction, improvement and renovation of commercial buildings contracted for, on or after 29th October 2019.
18. Low emission cars
If you are changing your company car, consider a low-emissions model as these are now taxed at a lower percentage of their list price than cars with a high CO2 rating.
19. Capital gains tax (CGT) allowance
Capital gains is the profit you make from selling certain investments, including second homes, art, antiques and shares. Capital gains in the 2018-19 tax year under £11,700 are tax-free. Married couples and civil partners who own assets jointly can claim a double allowance of £23,400. Remember, if you don’t use the allowance within the tax year, it’s lost forever.
20. Tax return deadlines
Don’t miss the 31st January 2019 deadline if you want to avoid a £100 penalty. Make sure you forward all the necessary documentation to your accountant with plenty of time to spare.
21. Help to Save scheme
For every £1 you invest the government will add a tax-free incentive of 50p up to £1,200 over four years. Help to save accounts are open to anyone who is entitled to working or child tax credits, or is claiming Universal Credit and has a household income of £542.88 or more per month.
22. Tax relief for Director salaries
Taking a salary in the pre-trade period is just as tax efficient as one taken after the business has commenced. A company can claim a tax deduction as if the salary had been paid on the first day of trade. Directors should apply the usual principles to determine the most tax and NI-efficient amount to draw.
23. Buy-to-let tax deductions
Where you’re trying to let a rental property that is vacant, the expenses you incur during this time are usually fully tax deductible so continue to maintain records to ensure tax savings are maximised.
24. Talk to your accountant
Your accountant can help you to save tax and should be able to advise on a huge range of business, financial and tax issues. Anyone can call themselves an Accountant but only Chartered Accountants have undertaken years of study, commit to keeping up to date and are regulated for your protection. If your Accountant is Chartered and can provide the trusted business advice that you need then great. If not, why not make a New Year’s resolution to get one who can.