Are you paying too much tax?
10 tax tips
Would you like the opportunity to reduce the taxman's take from your own and your family's income? If so read on, as
carrying out an annual review of your tax affairs could significantly reduce your own and your family's tax liabilities. The
tips in this document are available to most taxpayers.
1) Personal Tax returns need to be with HM
Revenue & Customs by 31 January at the latest.
If you want them to calculate your tax and send
you a statement of the amount due, the return
needs to be filed by the 30 September. A fixed
penalty of £100 applies if a return is not filed
by 31 January following the end of the tax year.
These penalties can rise to £1600 if a return is up
to a year late. It pays to file on time.
2) Review investments to make sure you have
made appropriate payments where necessary.
Every taxpayer should have a cash ISA: all
interest is tax free. The limit of contribution is
£15,240 per annum (tax year 2015/16) and the
cash can be withdrawn if needed – but cannot
then be returned (although there is a proposal in
the Budget that money paid in to an ISA can be
taken out again on an annual basis). These are
arranged directly with a bank or building society
and no commission is paid out so you keep all
your money.
3) Review your pension contributions. Paying
additional contributions to obtain tax relief at
40% or 45% is a good investment. If a sum
exceeding £10,000 as an additional contribution
is envisaged then opening a single premium
fund is worth considering. SIPPS are always
worth considering for pension funds of over
£50,000 to reduce management charges. There
are restrictions on how much, if any, additional
payments can be made and obtain higher rate
tax relief.
4) Married couples and those in civil partnerships
should arrange their affairs to ensure that their
personal allowances and the basic rate band of
tax are used to the fullest possible extent. This
may require transfers of investment income but
remember that this can only be achieved where
the beneficial interest in the underlying capital is
also transferred. Spousal transfers can be used
to avoid income based age allowance restriction
for people aged over 65. These also need to be
considered for Capital Gains where each spouse
currently has an annual exemption of £11,100.
5) Are your children making the most
of their personal allowances? If they
have income from a bank or building
society account and the total
income for the year is less than
their personal allowance, then
the child (or the parent on their
behalf) can register to receive
the income gross without
deduction of tax. However, if
the income is derived from
money that the parent has put
aside on the child’s behalf then
the income will be taxed as the
parent’s income (at the parent’s
marginal tax rate) while the child
is unmarried and under 18 years
of age.
6) Review any claims for working tax
credits and child tax credit. Claims for
credit will need to be made within three
months of the start of the tax year. Be sure to
check out your eligibility. The Treasury estimates
that over £2billion per annum is unclaimed in
pension credits, child tax credits and working
family credits.
7) With regard to Inheritance Tax planning, you
can give away up to £3,000 per year without an
inheritan