You all aim to pursue the dream to reduce your tax bills. For this purpose, there are several smart ways that can really help with getting tax relief in the UK. Regardless of whether you carrying the activities of small or large businesses or are associated with self-employment, this can be a useful read to everyone who is worried about the burden of tax in the UK. As the tax year ends on the 5th of April, every businessman and employer get ready for the tax payments. Here comes the importance of tax planning. Because with the new tax year, the tax allowances will be refreshed and if you have not used the previous tax allowances, they will be lost.
The new year comes with new opportunities to work smartly with ways of reducing your tax bills. If you are the one who is interested in looking for smart and popular ways to reduce tax bills, we have got you covered. This comprehensive guide will help you to know how can you handle pensions carry forward allowance, pension annual allowance, capital gains tax allowance, dividend allowance, and saving rate band. This will further help you to implement ways to reduce the number of your annual tax bills this year.
Accounting firms can assist you in managing your queries about how to reduce your tax bill and avail maximum tax relief possible. Let’s talk to one of our professionals or tax advisor.
What are the Popular Ways to Reduce your Tax Bills in the UK?
Making ways to create wealth is the main thing, however, maintaining your health in a way to grow is the other important thing in this journey. If you leave your tax unchecked, this will be a major drag that can make you suffer with great losses. This is really important here to have thought thorough and well-planned tax strategy to be on the top of tax games. This will refer to a well-optimised tax strategy to help you reduce the amount from your tax bills. These legal ways to minimise the tax bills amount will get your business to grow swiftly. A bit more detail about handling the following will take you to pursue your dream further.
1- Pension Carry Forward Allowance
The good news is that your pension annual allowance can be carried forward from the past three tax years. This will allow you to make a good contribution to your pension allowance. However, people are often of the view that the rules related to this pension carry forward allowance are complicated in comparison to another set of rules.
2- Pension Annual Allowance
If you are below the age of 75, your earnings are allowed to be contributed 100% into a pension. This could be an amount of £40,000. However, in the case of high earners, there are certain restrictions to follow the criteria. The pension allowance is one form of it. Some people are with no income source. It is allowed for them to contribute an amount of £2,880 within a tax year for their pension. When you are using your pension allowance annually, the prominent benefit that you will get is your contributed tax is tax-free.
3- Capital Gains Tax Allowance
You will have to pay capital tax gains when you are making profits on a second property or any other similar investment. The annual capital tax gains allowance received by eligible people is £12,000 within a tax year. If you plan to sell the gains, you can simply transfer this amount to your civil partner or your spouse. This will be even more beneficial if one of the partners is paying a higher rate of tax. Moreover, taxable investments can also be sold out. This is a tax-efficient idea if you reinvest them as well.
4- Dividend Allowance
As we all know that it is allowable for almost everyone to receive an amount of £2,000 in form of dividends which is also tax-free in every tax year, this is also a way to get an amount without having to pay any tax on it. This can be very useful for the people who are in the role of a director of the company or have shares that are outside of the ISA. In the case of being the owner of a company, you can hire your spouse in the role of a company director. This will help you to make the most benefits from the dividends allowance.
5- Saving Rate Band
The starting rate for saving which is also famous with the name saving rate band is quite beneficial to reduce your tax bills if you are eligible for this according to its particular criteria. Within a tax year, you will be able to save an amount to the extent of amount £5,000. This is a tax-free saving interest that you will receive every tax year. The main point criteria which will make you eligible for this is to have an income of around figure £17,500 in a tax year.
The Bottom Line
Now that we have gathered a fair amount of information about how to reduce your tax bill, we can bring the discussion towards wrapping up. Reducing the amount of your tax bills is actually possible if you follow the smart and tax-efficient ways to be implemented with a good level of accuracy. However, there are certain rules and regulations related to the criteria that will make you eligible for these ways to be implemented. We hope these few minutes of reading will help you better understand how to reduce your tax bill in the UK.
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Disclaimer: All the information provided in this article on how to reduce the tax bills in the UK, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.