With the Self-Assessment Season upon us, it seems like a good time to point out some of the ways you can, with some good planning, reduce your tax bill. Nothing here constitutes risky tax schemes—that’s just not what we do—it’s all just good old common sense.
If you’re lucky enough to have savings, make sure you’ve utilized your tax-free ISA allowance (for the current tax year it is £11,520 or £5,760 for a cash only ISA) before you leave sums around in accounts attracting tax on your interest
Contribute to a pension. Your personal contributions attract tax relief and if you run your own company, you might decide to make employer’s contributions, which will save your company corporation tax, as well as providing for your future. If you’re a higher rate taxpayer making personal pension contributions but not completing a tax return, consider starting to complete tax returns to obtain higher rate tax relief on your contributions.
Do you contribute to charity? If so, and you’re a UK taxpayer, then gift aid it. And, most importantly, keep a record of this. If you’re a higher rate taxpayer, by declaring your gift aid contributions on your tax return, you can get further tax relief.
Consider in whose name assets, such as bank accounts, should be. If your spouse or partner pays tax at a lower rate (or perhaps has income below the personal allowance) hold assets in their name to minimize any tax on them.
If you’re an employee and you are required to work from home regularly, then you can claim a no quibble £4 / week (or £208 / year) as an allowance to cover additional utilities costs. If your employer does not pay this to you, then claim this via your tax return as an employment expense.
Likewise, if your employer refunds you for business mileage in your private car at a lower rate than the HMRC approved 45 pence per mile, claim the shortfall as an employment expense on your tax return.
And if running your own business, make sure you do bother to record any expenses incurred wholly and exclusively for business purposes. This will reduce your profits and so reduce your tax bill. You wouldn’t believe the number of instances I’ve seen where people can not find the time to record all expenditure, and then complain about a high tax bill!