Today is the start of National Financial Planning Week and here Raj shares 10 top tips for reducing your tax bill:
1. Pay into a pension scheme. Invest in a company or personal pension and gain tax breaks on your pension contributions.
2. Maximise personal allowances. Ensure you are making the most of your tax-free personal allowance (PA). If your spouse or partner has little or no income, consider transferring income or income-producing assets to them so they make full use of the PA. This must be a gift with ‘no strings attached’.
3. Invest in an ISA. Up to £11,520 can be invested in an ISA in 2013/14, of which up to £5,760 can be invested in cash. Most income accrues tax-free. All investments held in ISAs, including the new junior ISAs are free of CGT.
4. Use your capital gains tax (CGT) allowance. Use your CGT exemption limit each year (£10,900 in 2013/14).
It may be possible to transfer assets, depending on the size of your holdings, to a spouse or civil partner or hold them in joint names to make full use of exemptions.
5. Review capital expenditure, maximise claims for capital allowances
6. Review your business structure. Business structure can have an impact on tax bills. If a sole trader or partnership, explore tax advantages of registering as a limited company.
7. Write a will and keep it up to date. A will can ensure any wealth built up during your life can be structured to save tax. You must review it regularly to ensure it reflects changes in family and financial circumstances and tax law.
8. Utilise inheritance tax exemptions. Make best use of IHT allowances, including annual exemption, so you can give away cash or assets up to £3,000 a year without incurring taxes.
9. Go for green transport. Switch to a ‘company car with low CO2 emissions and reduce your tax liability.
10. Rent out a room. Income from letting furnished rooms is exempt from tax if gross annual rent doesn’t exceed £4,250 (£2,125 if you share income). Sensible tax planning is an essential in making the most of your finances and helping your business’s profitability.