“In this world, nothing can be said to be certain, except death and taxes.” Ben Franklin
Paying tax is an unfortunate inevitability. For businesses and personal finances, the tax can be an overwhelming and confusing topic. Changes in the Budget come around so frequently it can be hard to keep up with the latest tax requirements, leaving us overwhelmed and probably paying far more tax than we needed to. If you’re looking for ways to save tax for the 2017/18 tax year, then read on for our top tips to save you money.
“The hardest thing to understand in the world is the income tax” Albert Einstein
Seven top tips to save tax
- Cash Isa
From April 2017, the tax-free amount you can invest in an Isa rose £4,760. This means that from April 6, 2017, until the financial year end, you can save £20,000 per year tax-free. So, if you’re looking to reduce your tax bill, are you utilising your Isa efficiently?
- Lifetime Isa
2017 is also the introduction of the Lifetime Isa, a government initiative put forward to enable people to save for their first home or their retirement. If you’re older than 18 but younger than 40, you can invest in your future, and what’s more, you receive a 25% bonus from the government for up to £4,000 per year that you save. This means you could receive an extra £1,000 a year.
- Capital Gains Tax
In 2017, the allowance for Capital Gains Tax increased. This year you can profit up to £11,300 from the sale of your assets, without paying tax. However, for profits over this, the Capital Gains Tax threshold is;
- 10% for basic rate taxpayers
- 18% for residential property sales for basic rate tax payers
- 20% for higher rate tax payers
- 28% for residential property sales for higher rate tax payers.
- Inheritance Tax
If you want to transfer your home to your children, there is a new transferable allowance worth £100,000, on top of the existing Inheritance Tax band of £325,000. This is an excellent way to maximise assets before paying the eye-watering 40% Inheritance Tax.
- Guests or lodgers
If you rent out rooms for students, boarders or via Airbnb, you can make an income of up to £7,500 without having to declare this. If you make more than this a year, it will have to be declared.
- Work from home
If you work from home and are self-employed, then you can deduct a ‘reasonable’ amount of costs before declaring your income. Reasonable costs include lighting, heating, council tax, mortgage interest, cleaning and insurance. However, it should be a proportionate amount, for example, the amount for one room in your house not all of them.
- Marriage allowance
If you are married and one earns less than the personal allowance of £11,500, they can transfer part of their tax-free allowance to their partner. For 2017/18 this amount is £1,150.
Confused about your tax bill?
These are just some of the ways that you can reduce your tax bill, to find out more methods and to receive advice about your personal wealth or business then book your free consultation with Hammonds Accountants today.