2014 is right around the corner and planning for next years tax season needs to start sooner rather than later.
Chartered accountants such as Gibson Hewitt can aid you in everything from correctly filling out a tax return to providing professional tax advice. Unfortunately, the majority of us cannot avoid paying tax but we can resolve to pay less of it.
As a business owner I have a lot of experience with this. Fortunately, I have never had to deal with too many headaches because I’ve always been lucky to have a great accountant on hand to help me make better tax decisions.
However the one thing I’ve learned is that you want to be prepare and start early, so make a New Year’s resolution to reduce your tax bill for the coming year by making small changes now that will make all the difference to your future.
Use your Pension
While you will be expected to pay income tax from the date of claiming your pension, you can qualify for tax relief while you work towards it.
The contributions you make towards your pension qualify you for tax relief, which if you are a basic rate taxpayer will entitle you to 20% relief and up to 50% relief if you pay a higher rate of tax. In other words, you can defer tax as you grow your retirement fund.
Share The Load
If your partner doesn’t qualify as a taxpayer, lighten the load by transferring any income into their personal credit so that when you are taxed, you can receive a lower rate since a small portion of your income will appear under his or her name.
Start an ISA
Frustratingly, standard savings accounts require us to pay tax on any interest we accumulate, even on low interest rates – which is why more and more of us are opening ISA accounts.
An ISA provides you with a tax-free means of saving which you can either invest in full into one account or split your funds into a basic cash ISA and a stocks and shares ISA. ISA’s are a great way to pay less tax and save money all round. You can even set aside money for your children’s university fund or general savings by opening a junior ISA account.
Check your Tax code
The tax code given to you by an employer denotes how much tax can be deducted off your pay and informs your employer of your tax status. For example, 747 means that you should be paying tax only when you are earning above £7,475. Your tax code allows you to check if you have been paying too much tax for the amount you earn and if so, how you can reclaim it.
If you’re curious to find out whether you are eligible to pay less tax or simply need advice on how to manage them in the following year, book a tax review with Gibson Hewitt Chartered Accountants. They can help you take control of your finances and even tell you what your tax savings could be – providing your finances with the fresh start it needs in 2014.
What are you doing right now to lower your tax burden in 2014?
Since I switched to self-employment, I am preparing for my tax burden to increase. However, we are looking into many things. There are a lot of business expenses that we can deduct, and I am working on organizing everything to make taxes easier.
That’s the downside to being unemployed Michelle. Paying quarterly estimated taxes suck, but it could be worse. I own a manufacturing business and I have things like workmans comp, 419 taxes, sales taxes, and several other taxes that I have to pay attention to as well. However in your situation you only have to deal with quarterly estimated taxes since you probably don’t have any employees to deal with which simplifies a lot of stuff.
One other thing I suggest is look into having a good accountant, and a great accounting program such as quick books. It will make you life simpler and your business easier to manage.
I have a stock and shares ISA. On the cash ISA the tax saving is minimal, but if your stocks and share appreciate, the savings are huge.
That’s awesome Pauline, I wish they had them in the US. It’s hard enough to get even a 1% interest rate on a fixed investment.