Tax
The subject of tax can be tricky when you first start
looking at it, but it pays to know about it. If you work, then you will be
paying tax, and the more you know about tax, the more money you can save. Here
are some things that you need to do regarding tax, and so tips to help you save
tax.
Keep all your records
If you don’t already know, it is required by law that you
keep adequate records of all your income and expenses. This law came into
effect in 1996. The records that you keep must be maintained for at least 22
months after the tax year they relate to, or for 5 years if you are
self-employed. Here are some examples of the things you should keep hold of:
- As
an employee you should keep all your payslips, as well as any details of
expenses you have claimed back from your employer. It is also a good idea
to keep hold of your P60 form.
- For
savings income you should keep a record of all you finance statements and
deductions. You should also keep any contract notes for capital
transactions.
- If you are
self-employed or in partnership then you should keep records of all your
business activities and transactions.
Ways to save tax
If you are ignorant about tax, then you could end up
paying too much tax. There are a number of ways that you can reduce the tax you
pay, which will leave you with more money to spend. Tax doesn’t have to be hard
or troublesome if you follow some simple guidelines:
Do not overpay
Many people end up paying too much tax simply because
their employer is deducting too much and they are unaware of this. You should
make sure that the tax deductions from your wage are correct, and if not you
should seek reimbursement.
Fringe
Benefits
Fringe benefits are a good way to save tax. Instead
of getting a raise in your wages, try and negotiate a fringe benefit such as a
company car. You will still be getting more, but you won’t be getting taxed as
much.
File your return online
The easiest way to file your tax return is online.
This will allow you to calculate what you need to pay much more easily, and
will help you to get all the details right so that you only pay the amount of
tax that you owe.
Hire a professional
If you are having problems with
your tax return, then you can hire a professional to help you, or to give you
advice. The cost of hiring a professional can often be less than the money you
will save by doing it.
Choose growth over income
If you pay a high rate of tax, then you should probably think about generating
growth rather than more income. If you can invest in schemes that generate
growth, then you wont be paying tax on this. If you are holding an asset, you
do not pay tax on the capital growth. Obviously you will have to pay a capital
gains tax once you sell the asset, but you have a limit for this outside of
your normal tax. If you do this correctly then you will pay less tax.
Maximise your pension entitlement
You should check to see if you have any unused relief that could be put towards
your pension. This is another good way of saving tax.
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Paying the tax that you owe is unavoidable, but if
you are savvy and do your research, then you can reduce your tax burden. If you
are concerned about tax, or want more advice, then hiring an independent
financial advisor is the best thing to do. Although you may think this is a
waste of money, with the right guidance you can save a lot money through tax
reduction strategies.