Overpaying the tax man is not just as a result of simply tax code mistakes, not maximizing your personal tax allowances, mistakes when claiming tax credit and not using the full allowance of pension or saving investment. If you are a tax payer who does not have the full understanding of the allowances you have as an individual tax payer then how can you save yourself money? Most people think it will be too complicated and simply do not bother to find out valuable information that can really save you money.
There are an estimated 30 Million taxpayers in the United Kingdom that submit their tax returns every year and there are a few things you should consider looking into before you fill out the forms. Saving money has become more important in this economic climate so here are a few areas you might have missed that could save you some more money.
Just double check the tax code and ensure your rate of tax is correct, it sounds simple but if it is wrong it can really cost you hundreds of pounds on an administrative error. If you happen to be over 65 the check whether you have been awarded the higher personal allowance which increases your amount to 9,490 from the 6,475 of the under 65's, if it hasn't been upgraded then get it done.
Get it finished sooner rather than later! You will be well aware of the deadline but being prepared and getting all of your paperwork in early rather than just on time can mean avoiding any accidental late submission which can mean a penalty. This is just common sense but it's amazing how many people are late and get charged over 100 pounds for simply being organised. For paperwork 31st October is the deadline but on-line submissions are 31st January which gives you more time.
If you are married then financial gifts between couples can be £6035 from the higher earner to the lower, reducing the rate which the money is taxed on which can make a real difference.
Pensions are incredibly efficient ways of saving especially when you are a higher earner. A personal or company pension scheme can be topped up with your own money to maximise your tax savings. The maximum amount of tax free saving is 235,000 in 2008/2009 which is a considerable amount.
There are some tax free winnings on gambling prizes, premium bonds and the National Lottery and although you need lady luck on your side, it might happen!
Your personal individual saving allowance is 3600 and for stocks and shares the allowance rises to 7200. This is a yearly amount and can really add up over time.
If you are planning to give your home to your children in your will then think about giving assets away early to your children. House prices are low at the moment so any inheritance tax paid will be much lower now than in five years time.
If you have a home based business then when claiming your business expenses using your rent/mortgage paid and utilities in the place of the dedicated office space can save you extra money.
If you have just started up a business then all business expenses up to seven years prior to official start up can be claimed so think about the money you have already put into your business and save now. The dates will need to be obvious in the receipts though to stop false claiming.
Tax is something that seems to increase rather than decrease but there are ways to avoid paying more than you have to. If you are unsure of any details about what you can and cannot claim for then seeking professional advice can really stop the headaches of playing too much tax.
Felicity is a freelance author, writing occassional columns in the UK. If you need to do a online self assessment tax return and don't know where to start, then try our fast tax returns. For low cost tax returns and more information please visit the Tax Returns Direct website.
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