Is your tax planning strictly above board?

Is it possible to out-smart the taxman legally? According to a recent article in the press, yes it is.

Accountants will be aware that there is a difference between tax avoidance and tax evasion. Avoidance is clever tax planning, whilst evasion is illegal and practising it could see you behind bars.

Chancellor Osborne has decided that the government needs to take action against the UK’s multimillionaires who exploit loopholes in our tax laws in order to pay next to nothing in tax. HMRC has revealed that the wealthy exploit three main loopholes and by doing so reduce the amount of income tax they pay by £145 million every year.

However, there are ways that the ordinary man in the street can reduce their tax bill, and they are perfectly legal. The self-employed for example can offset the costs of running their business from home against their end of year tax bill. That means you can claim for things like lighting, heating and repairs. It is worth bearing in mind though that of you devote a room in your property entirely for business purposes, you may have to pay capital gains tax when you sell up.

Taking advantage of your full tax-free savings allowances is a tax efficient way of making the most of your money. Since the start of the new tax year, individuals can save up to £11,280 a year in an ISA; £5,640 of which can be put in a cash ISA. Investing in your pension is also a tax efficient way of getting the best out of your savings, although the money is not immediately accessible, unlike a cash ISA.

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