11 tax saving tips by mibk

11 tax saving tips that will save you money

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Introduction Some say tax is boring but we disagree. Dealing with tax is an important part of life and it’s easy to overpay, especially if you don’t know what you can do to only pay the tax you need to. The world of tax often changes so staying informed is a good way to make sure you’re as tax efficient as possible. So, to help you protect your wage packet here are 11 clever ways that you can pay less tax… Page

3 Job expenses

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7 Check your tax code

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9 Break in employment

Page 10 Childcare vouchers Page 11 Tax free benefits Page 12 ISA’s Page 13 Pension tax relief Page 14 Use your spouse Page 15 Private landlords Page 16 Gift aid Page 17 Capital gains tax

1. Be sure to claim your job expenses Be sure to claim your job expenses You might be surprised just how many work related expenses you can claim against tax. Employees in many industries are able to claim a tax rebate for expenses such as: • Using your own car to travel to different workplaces • Washing your own work uniform • Paying fees to a professional body or union • Buying tools and protective clothing • Use of home You can claim these expenses for the past four tax years – so you could be due a considerable refund. What’s more, once you make a claim your tax code can be updated and you’ll continue saving tax each year. Mileage and travel If you use your own car to travel because of your job, you may be able to claim a mileage allowance relief. Many people don’t know they can claim mileage tax relief for some, or even all, of their work related journeys. It doesn’t matter what your job is – if you travel to different places of work, you could claim tax back on your mileage. Uniform Do you clean your own uniform for work? You could be entitled to a tax rebate if you do. If your uniform has a company logo or you use specialist clothing which you have to wash, you could be due a tax rebate.

1. Be sure to claim your job expenses To claim a uniform tax rebate you must: • Have to wear a branded uniform as part of your job − like a nurse or fireman, or a shop worker; in some cases a uniform with a detachable name badge may be allowed • Meet the cost of washing your own uniform • Not be reimbursed by your employer, or provided with laundering facilities (even if you don’t use them) • Have paid tax in the year you make your claim Professional body and Union fees If you pay fees into a professional body or Union, you may be eligible for tax relief.You may need a special licence, or require your name listed on a professional register in order to do your job.You might also belong to an organisation whose activities are very helpful in your profession, and help you in your work. Tax relief can be claimed on fees into many professional bodies and some Unions. You can claim tax relief on professional and Union fees: If you require professional membership or a license for your job, or choose to enter a voluntary organisation for job-related benefits • The organisation is approved by HMRC • Tax relief is not available if: • You’ve paid a life membership subscription • Your employer, rather than yourself, pays the fees for membership or subscription

1. Be sure to claim your job expenses Tools Joiner, mechanic, electrician, plumber? If you pay for your own tools for work, you can claim tax relief on what you’ve spent. If you have to buy tools for work you should be able to claim a tools tax rebate.You can make claim for any tools you’ve bought during the past four tax years – sometimes even longer. Can I claim tax relief on my tools? If you have to buy them to do your job, you can claim tax relief. To be eligible to claim tool tax relief you must: • Buy tools and equipment that you need for your job • Pay for your tools yourself • Not be reimbursed by your employer • Have proof of purchase - for example receipts How much tax back on my tools can I claim? You can normally claim tools tax relief of 15% to 20% of your tool purchases. A claim can be made for the last four tax years. If you’ve still got receipts for tools bought before then, you can claim for them as well. Use of home If you’re employed and have to work from home you can normally claim tax relief on some of your household expenses. You can currently claim £4 per week without having to provide evidence. It doesn’t matter what your job is, everyone who has to work at home can make a claim.

1. Be sure to claim your job expenses Can I claim? To be eligible to claim tax relief for working from home your contract must state that itâ&#x20AC;&#x2122;s a requirement of your job. Alternatively your employer can provide a letter confirming that you work from home as part of your duties. Work from home tax relief isnâ&#x20AC;&#x2122;t allowed on household expenses you would be paying for anyway, such as rent or mortgage payments. What can I claim for? Common examples of what you can claim are: The additional cost of utilities (gas and electricity) Work related phone calls

2. Check your Tax Code It’s important to know if your tax code is right. If it’s wrong you can either overpay or underpay tax. Each person who is normally employed is given a tax code, which lets your employer know how much tax should be deducted from your income. Where do I find my tax code? Your tax code can be found on a pay-slip. If you cannot find your tax code you can contact HMRC or you can refer to your PAYE notice of coding. What does my tax code mean? Every letter or number in the tax code represents a piece of information about your tax status. For example, any tax code ending in the letter L refers to your tax-free Personal Allowance. In this case the number at the start shows how much you can earn annually before tax. Different tax codes… There are many different tax codes, and your tax code can change during the tax year depending on your circumstances.

2. Check your Tax Code Here are some of the common tax code letters and their meaning: L - If you are receiving the basic personal allowance and under 65 2. K - Applied most commonly to people with company benefits i.e. a company car benefit where your allowances are less than total deductions 3. BR - Stands for basic rate. Applied most commonly for second forms of employment. The amount of tax deducted is currently 20% of your gross earnings 4. NT - Stands for non-taxable and is applied to income which is not taxed If the numbers in your tax code increase you will generally pay less tax and if the numbers in your tax code decrease you will pay more tax. What should I do if my tax code is wrong? If you think your tax code is wrong you should contact HMRC directly to allow for your tax code to be checked. 1.

If your tax code has been wrong the change should allow for any refund of tax to be made - if your tax code has resulted in you overpaying tax.

3. Gap year or break in employment If in the last four years you’ve had a gap year or break in employment you could be due tax back. Who can claim? It doesn’t matter if you’re a student or an OAP, anyone who has not worked for a full tax year, including people who have left the UK. In many cases you must make a claim to get this tax back. Leaving the UK means you need to tell the tax office, if you don’t, you won’t receive what you are owed. Why would I be due tax back? The main reason in is not using all of your tax free allowance in the year in which you’ve had a gap in employment. Remember you can claim your tax back for the last four tax years, so it’s not just the current tax year you need to think about.

4. Get your childcare vouchers Budgeting for childcare is just another thing to worry about for working parents, especially with the cost of living only getting more expensive. Childcare vouchers can help, by reducing your taxable income by up to nearly ÂŁ3000 per year.You get the vouchers from your employer, who has to be enrolled on the childcare voucher scheme. Depending on your circumstances they can affect the amount of tax credits you can claim.

5. Apply for tax-free benefits Millions of pounds of tax free benefits go unclaimed each year, often due to a lack of knowledge. There’s lots of benefits offered by the government which are all free from tax. It’s best to check which ones you could be eligible to apply for. The benefits help a wide range of people from working parents to pensioners. Getting the knowledge about what you are entitled to is important, so you don’t miss out on you tax free benefits. A complete A-Z list of all the benefits available can be found here

6. Think about opening an ISA An Individual Savings Account or ISA, is a good way to avoid paying tax on savings and capital gains. Each year the government announces the amount each individual can invest into an ISA. The limit is set in the budget and usually changes annually. There are two main types of ISA: Cash ISA The cash ISA is a good alternative to keeping your money in a bank account. Depending on the ISA you will be given an interest rate, which will normally be set for a particular number of years. Any interest you make will be paid to you tax free. Trading ISA The trading ISA is sometimes called a stocks and shares ISA. Instead of buying a stock, bond, or other financial asset on the open market you can buy them through a trading ISA. This means any capital gain you make will be treated as being tax free. Thereâ&#x20AC;&#x2122;s also a Junior ISA option which lets you avoid being taxed on gifts you make to your own children.

7. Tax free Pension Contributions and Claim your Private Pension tax relief Paying into a pension The government actively encourages tax payers to save. Tax relief on pension contributions is given in different ways depending on the type of pension. The three main types of pension are: • occupational • public service • personal pension scheme If you make Contributions to your employer’s pension scheme they will normally be made from your gross pay, before any tax is charged. Paying more into your pension is possible, meaning your increasing your pension pot tax free. Private pension tax relief The government gives tax relief on pension contributions at the highest rate of tax you pay.Your pension company will automatically collect the basic tax relief amount from HMRC and pay this straight into your pension. If you pay higher rate tax, it’s up to you to claim the rest. An additional 20% tax relief can be claimed, sometimes more.

8. Be sure to use your Spouse If you are a higher rate tax payer and have a spouse who pays tax at the lower rate, or who has unused tax allowances, you could make use of this to help you pay less tax. Many higher rate taxpayers have additional sources of income, from savings and dividends for example. This income needs to be declared and taxed accordingly. The idea is to give some of your additional income to your spouse, meaning youâ&#x20AC;&#x2122;ll pay less tax, and boost your overall income as a couple.

9. Landlords - Keep your tax bill down With property seen as a sound investment the number of private landlords in the UK is increasing. Keeping your tax bill down As a landlord, there are a number of allowable expenses you can deduct if they’re incurred wholly and exclusively for your property rental business. This includes expenses incurred in the day-to-day running of your property rental business, such as: • Mortgage interest • Letting agents’ fees • 10% wear and tear allowance for furnished properties • Accountancy fees Other expenses you can claim Before a property is let, you might incur considerable expenses in getting it ready. You can claim a deduction for pre-letting expenses if: • They were incurred no more than seven years before the start of the property rental business; and • They would be deductible if they were incurred once the business had started. Filling in your tax return Landlords normally have to register with HMRC for selfassessment and fill in a tax return each year.You need to claim for your expenses using the property income pages of the tax return.You also have to include income from all other sources.

10. Be sure to use Gift Aid Giving to charity is a great thing to do, and using gift aid helps by adding to your donation. The gift aid scheme is designed to encourage charitable donations and increases the value of your gift by 25%. The government adds an additional 25% to each donation through the gift aid scheme. As an example if you donated £100 the government would give £25, meaning the total donation is worth £125 to a charity. If you are a higher rate tax payer you can claim tax relief on your donation by entering the total on your self assessment tax return.

11. Consider using your capital gains tax allowance A capital gain is related to profits made on assets or investments. Everyone is given a yearly capital gains tax ( CGT ) allowance, meaning that only gains above this threshold will be subject to CGT. Basically you are allowed to receive profits from the sale of assets or investments up to a pre-set total, before having to pay income tax. Any profits made above the threshold is currently liable to tax at either 18% or 28%, depending on your earnings. Planning how you could spread the sale of assets over more than one tax year, could mean you receive more tax free profit than if the sale was made in just one year. Itâ&#x20AC;&#x2122;s worth remembering that children also get a CGT allowance and can use tax free profits in the same way.

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