As we hover upon the last quarter of the fiscal year 2020-21, making a profit from your savings might come as a more challenging task in this current scenario.
Entrepreneurs, as well as employees, are liable to pay income tax whatever the situation they may come across. Although keeping the recent pandemic in mind, Her Majesty’s Revenue & Customs (HMRC) issued a public notice that deferral in VAT payments with no interest or penalties tend to be charged. However, the due date extending until June 30, 2020, was not applicable for Mini One Stop Shop scheme consumers in the EU as it’s available for UK VAT registered business only.
Moreover, the Income Tax payments due on 31 July 2020 were deferred until January 31, 2021, with HMRC charging zero penalties or interest rate for late submissions.
The government’s flexible approach towards the income taxpayers may be a relief, but saving a new Pound sterling over your taxes is a valuable advice. Saving on fees and oneself from unnecessary financial stress is what any individual look forward to. Therefore, 123Financials – a group of accountants in London are here to increase your earnings and help seek helpful Tax Saving Tips on tax relief available with minimal effort. Below-enlisted are the best Tax Saving Tips that you can take a look.
Investing in Pension Scheme
One of the most efficient ways to save tax is to invest in a pension plan as it’s not only beneficial post-retirement, but you can earn in a hasty manner capped at 40,000 GBP.
Apart from this, one can invest in a non-earning partner’s pension plan too. Considerably a generous scheme, non-earners can enjoy a 25% sufficient sum of the total earning with the government adding up 720 GBP (if they contribute 2,880 GBP). Furthermore, if they withdraw the rest of the amount for personal allowances, then the rest of it will also be free of tax.
Putting money into an ISA
The Individual Saving Accounts helps you to save up to 20,000 GBP (for the fiscal year 2020-21) as it can be segregated in various ways such as cash, stocks, and shares, and so on.
Peer-to-peer loan scheme which comes under innovative finance is another way to benefit from taxes, thus lending money to other people or businesses without seeking support from a bank or any financial institutions.
As the medical expenses surging rapidly from the past few years, purchasing health insurance is always beneficial and helps to save taxes for you and your family.
Several policies ensure that liquid cash is not drained out during emergencies as the average premium health insurance (as per ActiveQuote source) starts from 1,435 GBP per year. However, it might be much less if you do not opt for private schemes. You may need to report it to your P11D benefits. Check with your accountant before buying one.
Tax-Free Childcare Scheme
The tax-free childcare scheme helps enable you to receive up to 2,000 GBP annually if you meet the set criteria. This particular tax saving tips is for those who earn less than 100,000 GBP per year inclusive of nurturing a child below 11 years old. You may also ask your employer to start a salary sacrifice childcare scheme.
Benefiting from Company Transportation
Wherever possible, try using company transportation (if entitled) as it not only will save that extra cost from your pocket but also you will end up gaining the benefit in kind tax by receiving the cash value of the car in your salary.
Suppose, you are a regular beneficiary of BIK tax. In that case, it will certainly be wiser to opt for low-cost emission cars which are now taxed at a lower percentage of their price listing in comparison to vehicles that emit more CO2.
Hire A Family Member
Considered to be a standard procedure amongst the business owners or entrepreneurs, hiring a family member can be a significant step in reducing tax.
Employing them under minimum wage scheme, it comes with an assurance that the employee doesn’t have to pay the fee along with setting off the company’s extra expenses which are carried during various duties.
Work From Home
The current scenario has bound us to work from home as commuting to the office is prohibited for many business sectors. Thus, the government has been emphasising on carrying self-employed businesses from their premises as HMRC allows generous tax-saving opportunities for entrepreneurs.
Claiming from the ‘Use of Home’ scheme, this particular tax-saving method helps one to use a proportion of home costs such as Council Tax, Mortgage Interest, Heat and Light Tax, Water Tax, Landline, and Phone Costs, etc. For further details, log on to HMRC official web page.
Flat Rate VAT Scheme
The scheme mentioned above is highly profitable for businesses in various ways. Under the HMRC rules, business owners may end up paying the single, flat-rate amount of VAT based on the VAT inclusive turnover.
The right businesses can take out an unexpected margin of profit regardless of the ROI. Accessorising over varied industries, the government has a list of Flat Rate VAT percentage (www.gov.uk/flat/rate/scheme) depending on the annual income. For instance, Real Estate /Property sector has 12%, Financial Services has 13.5%, and so on.
File Your Tax Return Before Deadline
Simplest and easiest way to avoid costly penalties is to file an Income Tax return before its deadline.
As per the government norms, tax return filing deadline is 31 January 2021, if filing online. Individuals filing a return via paper mandates them to register before 31 October 2020.
However, if one misses the deadline, a penalty of 100 GBP needs to be paid even if the employee or entrepreneur doesn’t owe any tax.
Those who own a startup can visit the self-assessment tax return criteria on the government portal.
Charity or Donations
Donating money in charities on an individual basis or via the company is always considered to be a right deed giving a self-satisfaction, thus followed by a tax benefit. This tax saving tips can save tax. So you can donate a required amount on a registered government or non-profitable organisation website henceforth gaining almost 25% of the given amount.
Priya is a full-time financial writer at 123Financials. She is a passionate blogger and loves to share her knowledge on various subjects. Content created by 123Financials– are loved, shared & can be found all over the internet on high authority platforms.