As specialist tax accountants we are always focused on helping our clients pay no more tax than they should. With this in mind we have pulled together a list of the most common pitfalls which can lead to an unexpected tax liability.
Needless to say, every situation is different, so please do contact us for a no obligation consultation should you wish to discuss your own individual situation…
TOP TEN TAX TIPS
- CHECK YOUR CODE – Tax codes are issued by automated systems by HMRC and are not checked by them prior to issue. They are based on historic information and are quite frequently incorrect. It can take up to 18 months for errors to be rectified and leave you with a large unexpected tax bill!
- CLAIM ALL EXPENSES – The expenses that you can claim against your employments/businesses are varied and are not automatically given by HMRC. You MUST claim all allowable expenses either via your tax return or tax code. Claiming these expenses can reduce your tax liability considerably.
- HIGHER RATE TAX PAYER? – Make sure you have claimed the higher rate tax relief due to you on pension contributions and gift aid donations. Again, this is not given automatically and you MUST make the claim to HMRC. This can lead to a tax refund or reduction in tax taken from your salary.
- TIMING IS ESSENTIAL – if you run your own business, review the position prior to the year end and ensure that you are utilising all available allowances to reduce your tax liabilities and increase your profitability.
- PLAN AHEAD – If you are in danger of losing some or all of your allowances such as personal allowance (if income is above £100k) or Child Benefit (if income is above £50k) – consider making additional pension contributions/charitable donations to reduce your income below the limits and save tax.
- INCOME ALLOCATION – Tax allowances and bands are individual and cannot be transferred between spouses/family members. Make sure that you investments and income are structured tax efficiently between yourself, your partner and your family from the outset to maximise the tax savings.
- ELECTIONS IN PLACE – Own a second property? Make sure you have elected your main residence efficiently to minimise your tax liabilities on eventual disposal. You have 18 months after the purchase of a second property to make any election.
- CLAIM LOSSES – Losses made on sales of assets or in running businesses must be claimed at the time they are made to be eligible for tax relief. This relief may be immediate and lead to a tax reduction or refund upon claiming (in limited circumstances). The remaining losses may reduce your liability in future provided the claim is made.
- FILE & PAY ON TIME – HMRC can now impose penalties for late submission (max – £1k), late notification (max – £100) and late payment (5% surcharges and interest) so make sure you meet all deadlines imposed to avoid costly fines! Another advantage of filing early is HMRC have less time to enquire in to your figures (12 months from the day you file).
- IF IN DOUBT – Under the self assessment system in place, the onus is on you to make sure that everything is correct on your tax return and HMRC impose hefty fines for errors so if in doubt……seek professional help!