With the self-assessment deadline approaching, it’s time to get your tax affairs in order. Being proactive and well-informed about tax reliefs and allowances can save you money and help you make the most of your hard-earned income. In this blog post, we’ve put together 20 actionable tax tips that you can implement to maximise your savings and minimise your tax liabilities. These tips cover a wide range of topics, from personal allowances and pension contributions to working from home expenses and research and development tax relief.
- Maximise your personal allowance: Ensure you’re using your full personal allowance by checking your tax code and ensuring all your income is accounted for. For example, if you have multiple sources of income, such as a salary and rental income, make sure both are considered when calculating your personal allowance.
- Claim expenses: If you’re self-employed, don’t forget to claim all allowable business expenses, such as travel costs, office supplies, and equipment. For example, if you need to travel for work, you can claim mileage, train tickets, or even flights as long as they are solely for business purposes.
- Use the Marriage Allowance: If you’re married or in a civil partnership, and one partner earns less than the personal allowance, you could benefit from the Marriage Allowance, which allows you to transfer a portion of your unused personal allowance to your spouse. Remember, you can also backdate your Marriage Allowance claim for up to four years, potentially resulting in a significant tax rebate. For example, if your spouse earns £9,000 per year and you earn £30,000, you can transfer £1,260 of your personal allowance to your spouse, reducing their tax bill by up to £252.
- Contribute to a pension: Pension contributions can reduce your tax bill by lowering your taxable income. For example, if you contribute £2,000 to your pension and you’re a basic rate taxpayer, you could save £400 on your tax bill. Higher and additional rate taxpayers can save even more.
- Save with an ISA: Individual Savings Accounts (ISAs) allow you to save money tax-free. Make sure you utilise your full annual ISA allowance to maximise your tax-free savings. For example, you can save up to £20,000 per year in a combination of cash, stocks and shares, and innovative finance ISAs without paying tax on the interest or gains.
- Work from home expenses: If you work from home, you may be able to claim expenses related to your home office, such as utilities and office supplies. Check the HMRC guidelines to see what you can claim. For example, you might be able to claim a portion of your energy bills, internet, and phone costs based on the percentage of your home used for business purposes.
- Donate to charity: Donations made to registered charities are tax-deductible. Don’t forget to include any donations you’ve made during the tax year in your self-assessment. For example, if you donate £100 to a charity and you’re a basic rate taxpayer, the charity can claim Gift Aid, increasing your donation to £125, while you can claim £25 in tax relief.
- Keep accurate records: Maintain accurate records of your income and expenses throughout the year to make completing your self-assessment easier and more accurate. For example, keep a log of business-related travel, including dates, destinations, and mileage, as well as receipts for purchases related to your work.
- Claim tax relief on professional fees: If you pay fees to professional organisations, such as trade unions or professional bodies, you may be able to claim tax relief on these expenses. For example, if you’re a nurse and pay £100 per year to the Royal College of Nursing, you could claim tax relief on that amount, reducing your tax bill.
- Utilise capital allowances: If you’ve purchased assets for your business, such as machinery or equipment, you may be eligible for capital allowances, which can help reduce your taxable profits. For example, if you buy a new computer for your business worth £1,000, you could claim the Annual Investment Allowance (AIA) to deduct the full cost from your taxable profits in the year of purchase.
- Claim for business mileage: If you use your personal vehicle for business purposes, you can claim a tax-free mileage allowance for every mile driven. For example, if you drive 5,000 business miles in a year, you can claim 45p per mile for the first 10,000 miles, which amounts to £2,250 tax-free.
- Consider the VAT Flat Rate Scheme: If you’re VAT-registered, the Flat Rate Scheme can simplify your VAT accounting and potentially save you money. For example, if you’re a graphic designer with a flat rate of 14.5%, you charge your clients the standard VAT rate of 20%, but only pay 14.5% to HMRC. The difference can help cover your VAT on expenses.
- Invest in Enterprise Investment Schemes (EIS): Investing in qualifying EIS companies can provide you with income tax relief and potential capital gains tax savings. For example, if you invest £10,000 in an EIS-eligible company, you could claim £3,000 (30%) in income tax relief and potentially defer capital gains tax on other investments.
- Review your capital gains: If you’ve sold assets that are subject to Capital Gains Tax, consider using your annual exemption to reduce your tax liability. For example, if you sell shares for a profit of £15,000, you can use your £12,300 annual exemption to reduce your taxable gain to £2,700, potentially saving you a significant amount in tax.
- Claim tax relief for tools and equipment: If you’re self-employed and have purchased tools or equipment for your trade, you may be able to claim tax relief on these expenses. For example, if you’re a carpenter and you buy a new set of tools for £500, you could claim tax relief on that amount, reducing your taxable income.
- Incorporate your business: If you’re self-employed and your profits are increasing, consider incorporating your business to take advantage of limited company tax benefits. For example, limited companies can benefit from lower corporation tax rates and can pay dividends to shareholders, which can be a tax-efficient way to draw income.
- Childcare vouchers or tax-free childcare: If you have children and pay for childcare, consider using childcare vouchers or the tax-free childcare scheme to save on your childcare costs. For example, you can save up to £933 per year with childcare vouchers or receive up to £2,000 per child per year through the tax-free childcare scheme.
- Rent a room relief: If you rent out a furnished room in your home, you may be eligible for the Rent a Room relief scheme, which allows you to earn up to £7,500 tax-free per year. For example, if you rent out a room for £600 per month, you would earn £7,200 per year, which is tax-free under the Rent a Room relief scheme.
- Consider research and development (R&D) tax relief: If your business is involved in developing new products, processes, or services, you may be eligible for R&D tax relief, which can significantly reduce your corporation tax bill. For example, if your company spends £100,000 on qualifying R&D activities, you could claim an additional £130,000 in tax relief, reducing your taxable profits by £230,000.
- File your self-assessment early: Avoid last-minute stress and potential penalties by filing your self-assessment tax return early. This gives you ample time to gather all necessary information, check for errors, and ensure you’re claiming all applicable reliefs and allowances. For example, if you file your return in November instead of waiting until the January deadline, you’ll have several months to address any issues that might arise, giving you peace of mind and potentially saving you money in the long run.
We hope you found these 20 tax tips helpful and that they empower you to take control of your tax affairs before the self-assessment deadline. Remember, staying informed and proactive about your taxes can save you money and make the process less stressful. If you need further assistance or advice, don’t hesitate to get in touch with our team at Yorkshire Accountancy. We’re always here to help you navigate the complex world of taxation and ensure you’re making the most of your financial situation.
