10 Top Tax Tips

Whatever the Chancellor’s red box reveals on 22nd June in the Emergency Budget, Chas Roy-Chowdhury, head of taxation from ACCA (the Association of Chartered Certified Accountants) has ten non-taxing tax tips to legitimately lighten the load.

1. Be ISA-wise

On 6 April 2010, the annual Individual Savings Account (ISA) subscription limit rose to £10,200. The whole sum can be placed in a stocks and shares ISA, or alternatively, up to half can be put into a cash ISA, and the remainder into a stocks and shares ISA.

“For a couple, this represents £20,400 savings protected from capital gains or income tax,”

says Chas Roy-Chowdhury, ACCA Head of Taxation.

“So even though interest rates aren’t as good as they have been, ISAs are still a worthwhile investment. But make sure you use your entire allowance, as it won’t be carried over into the next tax year.”

2. Know your entitlements

HM Revenue and Customs’ (HMRC) website lists 28 separate means-tested benefits and tax credits – yet according to the Citizens Advice Bureau, some £16 billion-worth goes unclaimed each year.

“A huge amount of taxpayers’ money is going to waste, and a huge number of people are missing out. The Budget will likely make changes to some of the existing entitlements, so make sure you keep up-to-date with what you can claim, and do so.”

3. Claim tax relief on your pension

Currently, if you pay higher-rate tax but earn less than £130,000, HMRC will give you £40 tax relief on every £100 saved.

“There has been speculation that the Budget will lower tax relief on pensions to the basic rate. But pension contributions will remain nonetheless a very tax-efficient investment.”

4. Will away IHT

If you pass away without making a will, HMRC rules dictate how your estate is divided up. Yet if you do make a will, you can not only have a say over who gets what, but also minimise the inheritance tax (IHT) payable.

“Conservative plans to raise the IHT threshold have been shelved under the coalition arrangement, so it remains the case that any amount you leave above £325000 will be taxed at 40%. However, some gifts, such as money left to charities or paid into trust funds for children and grandchildren, are not taxable. A little planning goes long way in reducing the tax liability.”

5. Be a partner in tax

By transferring assets from one spouse to another, couples could pay less tax. Chas Roy-Chowdhury remarks:

“Many partners hold joint savings. But if their income differs, it is far more sensible from a tax perspective to move assets into the sole name of the individual on the lower tax band.”

6. Don’t lose out on interest

Savings interest usually has 20% tax taken off before the saver receives it. But anyone over 16 whose income is less than their tax allowance does not have to pay income tax on their savings.

“If you have children who are not working and have a savings account, then they should complete HMRC form R85 to ensure that they are paid gross interest, that is, without tax being deducted,”

says Chas Roy-Chowdhury. The R85 form is available from the HMRC website and from banks and building societies.

7. Check your tax code

Your personal tax code is critical to working out how much tax you should pay. Yet HMRC’s shift to a new computer system earlier this year saw thousands of erroneous codes sent out, and thousands of people out of pocket.

“Now more than ever, it’s vital to check your payslip to make sure your salary is stated correctly, and that you are being taxed at the appropriate rate.”

8. Tick for Gift Aid

Whether you are sponsoring somebody raising money for charity or donating through the payroll, make sure the Gift Aid box is selected so that the cause gets the full, tax-free amount. says Chas Roy-Chowdhury says:

“For higher-rate taxpayers, one tick makes the difference between a 40% tax and a 20% tax on the value of their donations.”

9. Pay up and pay on time

Even those with the best intentions could find themselves missing a tax payment cut-off date or forgetting to inform HMRC if their circumstances change, and incur a hefty fine.

“From April, the taxman added to the existing penalty for inaccurate tax returns with a new ‘failure to notify’ penalty, and one for VAT and excise discrepancies. Tax mistakes are costly, but easily averted if you keep track of deadlines and keep HMRC up-to-date with your situation.”

10. Ask a professional

Tax can be taxing – but it is somebody’s job to help you understand it.

“The UK tax system is complicated enough, and changes are inevitable under a new government. But be it for advice on day-to-day issues, a one-off endeavour or business planning, a professional and qualified accountant will be able to navigate you through the complications.”

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