A new tax year is officially underway - and with it comes the opportunity for you to look at smart ways to reduce your tax liabilities throughout the year.
GoSimpleTax's Technical Director Mike Parkes details the most effective tips to maximise your tax savings.
Understand what the tax changes mean for you
Each fresh tax year brings changes to how the tax system will work. But, depending on your individual circumstances, not all of these will affect you.
For example, if you're a limited company director, then it's worth being aware that dividend tax rates remain the same, so you won't be able to further boost your tax efficiency in this way. Or, if you're now required to submit VAT digitally under MTD for VAT, then you'll need to ensure you comply with HMRC's digital path.
GoSimpleTax makes your self assessment tax return quick and easy, helping you figure out which expenses and allowances you can claim.
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There are changes which will impact you regardless of your tax situation, such as the Personal Allowance. The amount that is tax-free has increased by £650 to £12,500. This has also shifted the basic (now £12,501-£50,000) and higher rate (now £50,001-£150,000) bands up, allowing tax savings to be made. As for the additional rate band, this remains at £150,000 and above.
Claim all allowable expenses and capital allowances
Another way you can reduce your annual tax bill is by claiming back expenses. There are a variety of different types, including costs for travelling and business premises.
If the latter is your home, then you can claim on those parts of your property which are used for work. You should note that, with all expenses, the amount offset must be solely for business purposes. For example, you won't be able to claim your entire heating bill against home working.
On top of expenses, you can also deduct capital allowances before you pay tax. This can be claimed when you buy assets for your organisation such as equipment, machinery and vehicles. Depending on your business, you may also be able to claim additional capital allowances like extracting minerals, research and development, and patents.
Those who own a furnished holiday letting business can offset items within it, providing the property is available as a holiday letting for 210 days, and rented for at least half this time.
Select suitable self assessment software
Working out which capital allowances and expenses you can claim for is a lot easier if you use tax return software to effectively guide you through the process. However, this isn't the only way these tools are valuable. Great software will guarantee that you're completely compliant with HMRC's digital journey, as well as all relevant legislation.
When choosing the tools, you'll also want to make sure that tax-saving recommendations are provided, so that you can achieve the utmost tax efficiency. Extra features will help with this, such as automatic tax calculations, full visibility of your financial situation throughout the year, and easy capturing and uploading of paper records.
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