These tips are designed to give you an idea of what can be done to reduce your tax bill. If you think that you can benefit from any of these tips please make sure that you seek advice from a professional.
- Take money out of your business in the most tax-efficient manner
Sacrificing a portion of your salary in return for non-cash benefits or dividends can make sense for business owners and employees alike. It is worth regularly considering the most tax efficient options in order to maximise your personal finances.
- Is your business structure the most suitable?
The structure of your business can have significant implications for your annual tax bills. For example, as your profits increase it may be beneficial to form a limited company, however, there are other factors to think about when considering changing the structure of your business.
- Timing your dividends and bonuses correctly
The timing of bonuses and dividends can have a big effect on how much tax you’ll have to pay and how long you have to pay it. Delaying expenditure to aid cash flow may not be the most tax-efficient approach, but if you are close to your higher rate income tax limit for the year it may be worth delaying dividends and bonuses.
- Make your will tax efficient
A well drafted will can be used to ensure that the wealth you’ve built up over your lifetime benefits the right people on your death – and it can be structured to be tax efficient by making the most of inheritance tax allowances (IHT). Leaving gifts to charity can also reduce your IHT rate.
- Tax free investments
Moving your savings to a NISA will enable you to save up to £15,000 without paying any tax on the interest – this can be cash or stocks and shares or a combination of the two.
Also, when you invest in Enterprise Investment Scheme shares, income tax relief is available at 30% on investments totalling up to £1m.
- Invest in a pension
Subject to certain limits, investing in a company or personal pension scheme will afford tax breaks on your personal pension contributions. Also, if you don’t provide for your retirement, who will?
- Make the most of your losses
If your business has made losses, it may be possible to off set the losses against income from the previous year in order to reduce the amount of tax you owe.
- Is your PAYE code correct?
Many people go for years inadvertently paying the wrong amount of tax because their tax code is incorrect. Make sure that your tax code is correct to avoid paying the wrong amount of tax.
2015 is an election year and as such it is likely that there will be an emergency budget following the general election. It is possible that some tax reliefs will be restricted. If you intend to make use of current tax reliefs, it would be sensible to use these ahead of the election in May.
The information contained on our Blog is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser. While we have made every attempt to ensure that the information contained on our Blog has been obtained from reliable sources, ‘One Plus One Ltd’ is not responsible for any errors or omissions, or for the results obtained from the use of this information.