A guide to tax planning

Income tax planning can make a big impact on the amount of tax you pay. Planning ahead allows you to take advantage of any opportunities to minimise your tax bill.

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The basics

Tax planning is a term given to the process of utilizing your tax knowledge and tools to ensure that, if you are registered for Self Assessment, you pay less tax come 31 January. In the UK, those who need to register for Self Assessment include directors of companies, for example. You can find out if you need to register for Self Assessment here.

The ultimate aim is to reduce your taxable income. Tax planning can also include:

  • Estimating your income taxes
  • Qualifying for the right reliefs
  • Deducting the most (possible) expenses

What tax can you minimise?

Earnings

Your employer may offer various employee benefits, which might offer tax advantages – including employee incentive schemes. The provision of a company car, for example, can involve a sizeable tax charge.

When planning for income tax, look at the value and tax consequences of tax relief on pension contributions as these payments may be tax deductible.

Savings

When it comes to savings, simple income tax planning steps can include using ISAs or transferring savings to your spouse to reduce income and capital gains tax.

Those with high income or a large amount in savings could also look at the possible tax breaks for investing in venture capital trusts or even making pension contributions on behalf of your children.

Property

While you will likely pay stamp duty when you purchase a property, the property itself has a relatively low tax rate and is exempt from capital gains tax. However, it is important to note that second homes, investment properties and business premises will not be exempt.

Planning for income tax on property is particularly important, as the tax can be complex. Your exposure to capital gains tax also needs to be taken into account.

Key dates for Self Assessment

To make the most of your planning efforts, remember the two most important deadlines below:

31 January

  • Self Assessment return due
  • Payment of taxes due
  • 1st payment on account (in advance)

31 July

  • 2nd payment on account (in advance)

Once you have calculated your Self Assessment return and determined that you due a refund, you are then able to proceed with claiming it back.

Our experienced team of accountants can help you keep on top of your accounting admin throughout the year. Visit our website to find out how we can make sure you only pay the tax you need to.

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