Six Accessible Ways To Pay Less Tax ways to pay less tax

Six Accessible Ways To Pay Less Tax ways to pay less tax

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“In this world nothing can be said to be certain, except death and taxes.” Never a truer word spoken than this legendary saying by Benjamin Franklin, so how do we pay less tax without being arrested for tax evasion I here you ask? Well firstly always speak to a professional financial advisor but to give you some ideas here are our top six suggestions to help you in 2011.

1. Reduce your family’s tax burden in the event of your death: At the risk of sounding morbid getting proper life insurance advice to ensure your affairs are straight in terms of a will and trusts can help reduce cost in the event of your demise and help avoid Inheritance Tax. During the tax year of 2010/11, you are able to leave up to 325,000 completely tax free. Not only this, but you can leave this amount to anyone, whether that’s a spouse or somebody else. Should you leave anything in excess of this amount, you will only need to pay 40 per cent in tax. If that wasn’t enough, wills of course guarantee that your assets are left with the people you want them to be. The key to getting this right is to get professional advice.

2. Take advantage of a tax free savings account (ISA): Individual Savings Accounts, or ISAs, are a fantastic way of saving money that is not tax-deductable. If you are a regular saver and hold a standard savings account, it may be worth considering an ISA as you will currently be taxed on your savings. For the tax year of 2010/11, an ISA allows you to save up to 5,100 annually, although this is increasing to 5,340 for the 2011/12 tax year.

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3. Tax relief on business mileage using your own car: It’s not commonly known that use of your own car for work can be claimed as tax expenses for business if your employer does not fully compensate you under HMRC guidelines. This will no doubt mostly apply to couriers and people who have to travel to different business sites regularly by car, van or motorbike, so look to see if you qualify for tax allowances for these journeys. First point of call for the right forms and to check if you qualify, HMRC.

The amount you can claim depends entirely on how much qualifying business mileage you make, how regularly you make it and what vehicle you drive. HM Revenue and Customs have a comprised list of ‘mileage rates’ for different vehicles which you can easily find online. When calculating exactly how much you can claim, you must determine how much your company pays in expenses and it is also important to recognise that simple commutes to and from the office are rarely classed as business mileage.

4. Fully use your capital gains tax (CGT) allowance: Do you own any assets, shares for example? Capital gains tax is the tax charged on the profits made by such assets. So for example, say you bought 20,000 shares in 1990 priced at 1 each but sold each of them in 2011 for 6, you would have an accumulated a hefty profit.

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There is a slight hurdle here though and is the fact that the CGT nil rate band is 10,100 in the 2010/11 tax year. This means that any profit made up to this amount is completely tax free. In an attempt to avoid passing this amount in profit, it is advisable to sell your assets in smaller amounts over an extended period of time, say, a set amount each year. This will significantly reduce the amount of capital gains tax that has to be paid

5. Donate to charitable institutions: If you’ve heard of gift aid, this is what it applies to. Charities in the Britain are given preferential treatment, so are those who give regularly to charity. Minimum requirement is to be a basic rate taxpayer, this is where gift aid comes in, after charities take you donation (its money you’ve been paid, hence tax has already been taken) you can now reclaim the basic rate tax back from HMRC on the gross before tax was deducted.

Although, if you are classed as a higher rate taxpayer you can still claim back some tax. You can calculate this by marking the difference between the basic rate of tax (currently at 20%) and the higher rates of tax (in other words 40% or 50%) on the gross value of your charitable donation.

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6. Landlords can claim tax back on property expenses: If you are a landlord and rent a property, there are various things that you can claim for – often much more than people think! For example, council tax, letting agent fees, maintenance and repair costs, utility payments and home insurance. To find out what your rented property can claim for, do some research, you could end up saving much more than you originally thought.

Debi writes for Just Life Insurance the UK’s No1 website for Free Life Insurance Advice, Over 50′s Life Insurance and market leading Life Insurance Quotes.

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