Our top 7 tips for how to give yourself a clean tax bill of health.
- Train….. yourself to claim tax relief for everything you are entitled to:
Employees:
- If your employer does not pay your business mileage at the full authorised mileage rates you can claim tax back on the difference. See Travel (summary for employees)
- People in certain professions can claim tax relief on a fixed rate amount if they wash the uniform given to them by their employer. See Fixed sum allowances: set classes of employee
Self-employed:
- Landlords can claim mileage based on authorised mileage. See Property profits & losses: toolkit (2019-20)
- Sole traders can claim vehicle running costs if they disallow a proportion for private use. See Motor expenses (self-employed)
Directors:
- A director can reclaim all home working expenses from their company (rather than making a claim on the tax return), provided that they perform some or all of their duties from home. See Working from home (directors)
- Exercise…all available allowances
- If your company owes you money you can charge interest and it will be taxed as savings income. See Savings income: tax on interest
- Rent out a room in your home and earn £7,500 a year tax free if you live there too. See Rent A Room relief
- If you have trading or property income of less than £1,000 per year it will be tax free under the trading and property allowance. See Allowances: Trading and Property
- Use your ISA allowance; you can invest up to £20,000 per year and income and gains are tax free.
- Consider selling and reacquiring investments sitting at a gain to utilise your CGT annual exempt amount.
- Make pension contributions. See Pensions: tax rules and planning
- Jump....into tax efficient benefits
An employer can provide certain benefits tax free including:
- A mobile phone
- A bicycle and safety equipment
- Annual parties and functions
- "Trivial" gifts & benefits. They also apply to directors but are limited to benefits worth £300 or less per year.
- Recreational benefits. An employer can provide a workplace gym if it is available to all staff.
- Tax free childcare, or a workplace nursery
- £4 per week for homeworking
See Tax free benefits and perks
- Work as a team
- You can employ your spouse or other family members (including children) in your business; the amounts must be reasonable for the work undertaken and the expense must be "wholly and exclusively incurred" for the purposes of the business. See Wages: spouse or family
- You might be able to create new share classes in a family company in order to split dividend income with a spouse or close family members. See ABC or alphabet shares: family companies
- Family investment companies can be used for wealth protection, income tax and inheritance tax planning, as can family trusts.
- Give up..some of your assets and income
- You can reduce IHT by making lifetime gifts within the annual exempt amount and as normal expenditure out of income. See IHT: gifts
- You can claim higher rate relief on charitable donations. See Gift aid
- Gifts of trading assets may be eligible for CGT gift relief
- Get married.
- One of the most common and effective forms of deathbed IHT planning involves advising unmarried partners to marry to take advantage of the IHT spouse exemption on death.
- Other benefits include the transferable married couples allowance, CGT spouse exemption, the transferable nil rate band, change the split of beneficial ownership for joint property income and non tax related benefits such as state pension.
And finally……
- Reduce your sugar intake
We all know that sugar is bad for our health but since the introduction of the sugar tax in April 2018 it is bad for our tax health too with many retailers passing on the cost of the sugar tax to the consumer.
Last time:
8 things I wish I had known about Making Tax Digital for VAT
And the time before that: