3 ways to save tax THIS tax year (if you are quick)

The number of higher rate taxpayers has doubled in the last ten years. Doubled, despite a declining economy and many businesses struggling to make sufficient profits. Many doctors and dentists will be higher rate taxpayers, forking out 40% of earnings over £41,865 (14/15) and some will even be paying the top rate of tax at 45% on taxable income of more than £150,000.. There are still ways to reduce your tax liability within this tax year; however, you only have a few weeks so you need to act now.

Do you know how high your tax bill will be?

The end of the tax year is just around the corner on 5 April 2015. That leaves just a couple of weeks to take any last minute action to reduce your tax bill for this year. If you work closely with your accountant then you will hopefully have an idea of what your tax liability is likely to be for the year ended 5 April 2015 and will have been already stashing away the necessary funds in a separate bank account so you avoid any nasty surprises. Although you have until January 2016 to make the payment it is always best practice to save as you earn. Figurit work alongside dentists and doctors using tried and tested tax planning techniques to keep tax bills as low as possible.

Simple ways you may still be able to save tax this tax year

It is always best to carry out tax planning on a longer-term basis, as more options are available when there is time to execute a tax planning strategy effectively. Regardless though, there are some things that will always appear on the list and a few of these you can still action if you don’t delay.

1. Ensure you are using both spouse’s allowances and tax bands

The personal allowance for 14/15 is £10,000, enabling every taxpayer to earn up to this level free of tax. Basic rate tax is then changed on earnings up to £31,865 (14/15). If your spouse or civil partner earns less than £41,865 yet you are falling into higher or top rate tax, it is worth looking into whether you can transfer some assets or income into their name to reduce your own taxable income. Transferring savings and investments are examples of how this can save you tax. Read more: Tax Summary Rates 14/15 and 15/16

2. Are you and your spouse using all your ISA allowances?

In 2014/15 the ISA allowance is £15,000 per person. This was following the introduction of the New ISA in July 2014.
  • 100% of this can be held in a Cash ISA, so it suits those investors who are not open to taking huge risks with their money, and
  • Transfers between Cash ISA’s and Stocks and Shares ISA’s are available, giving more flexibility to ISA savers.
ISA allowances should be used in full where excess funds are available. One reason is the rate of interest is likely to be better than a regular savings account anyway, due to the extremely low Bank of England interest rate. Most importantly though, interest earned and capital gains made from a Stocks and Shares ISA is completely free of tax. Make sure you and your spouse or civil partner are utilising both annual ISA allowances.

3. Are you maximising your pension contributions?

Each year, millions of UK residents claim tax relief from the government by paying into a private pension. Pension planning in line with tax planning is a great way to reduce the amount of higher rate tax paid and can even avoid it being paid all together, depending on how close to the tax bracket you are and how much of an investment you are able to contribute.
  • Essentially, money you would be paying in additional taxes can be invested into your pension.
  • The pension fund is also able to grow without an impact on Income tax or Capital Gains tax, and
  • From April 2015 new more flexible rules mean withdrawals can be taken earlier and with a tax free 25% lump sum.
Children and non-taxpayers can also claim an element of tax relief so it’s good planning for the whole family! Reducing the tax bill for our client’s is a key part of the role as an accountant, alongside the tax compliance. Figurit will work out a bespoke tax planning strategy for you in line with your financial circumstances, retirement goals and your attitude to risk. Call to speak to one of our experienced team today. T: 020 7376 9333 E: info@figurit.com

Related Articles

– July brings the NISA and the banks are ready – Pensions – autumn update – TAX: Summary of tax rates for 2015-2016

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