Keeping Your Tax Bills Down Leigh

Taxation is a complicated beast to deal with in one article, but we bring you an overview of important things to consider, and links to the places where you can find all the right answers in more detail.

Employed or self-employed?
What is your employment status? If you are an employee, presumably receiving monthly or weekly payments, you will have a tax code and be able to see from your pay slip how much money is being deducted through the Pay As You Earn (PAYE) scheme. If you are self-employed, you may be a sole trader, a proprietor of a company. Self-employed people can deduct allowable expenses from income before paying tax on what's left. A plumber, for example, would probably need to buy tools, equipment and a vehicle and pay for advertising - all of which would, within reason, be considered costs of running the business. Not all self-employed people need an accountant but it's advisable to have one to advise you on your tax position.

Also, if you run your own business and you actually make a loss in any given year, yuo can offset that loss against profit made in a subsequent year.

Check your tax code
You can check your tax code on your payslip, if you have one, or with Her Majesty's Revenue and Customs (HMRC). The tax code dictates your basic tax allowances - the amount you are allowed to earn before you pay income tax.

Capital gains
You might earn dividends on shares, for example, or the sale of a second home, or inherit some money. Money from capital gains is subject to Capital Gains Tax (CGT) and there is a tax free allowance on capital gains each year, as well as, in some cases, taper relief when you are selling shares that you have held for a long time.

If you are planning on making a capital gain, such as by selling shares or a property, you should look into an efficient way of doing it. Is the asset in only your name? If so, consider transferring some of it to your partner's name, and benefit from the double tax-free allowance when you sell it - although you should consult a tax expert about the rules and timings for doing this. Tax laws change from year to year.

If you have savings, consider an ISA
Individual Savings Accounts (ISAs) are tax efficient ways to save money because you don't pay tax on the interest they earn and you could also look at products available from NS&I (National Savings & Investments), famously known for its premium bond cash prizes. NS&I offers index-linked savings certificates that offer tax-free benefits.

Consider your salary level
Once your income per year reaches a certain level, you will move on to a higher tax bracket. If your salary is just enough to push you over the higher tax bracket, consider dropping slightly and seeking other benefits, such as childcare vouchers or a subsidised bike. There are quite a few schemes for employers and employees that carry less tax on the benefit (or none at all) than the income tax on the equivalent salary.

Open a child trust fund
Child trust ...