It’s always good practice, before the next tax year begins, to have a hard look at your tax strategies. Significant savings can be made when you assess what you’ve paid before and how that could be cut down in time for your next Self Assessment.
SimpleTax have made it a little easier for you. Here are five solid tips to reduce your tax bill in 2018:
1. Use your dividend allowance, if you have one
Limited company owners can split their wages and dividend payments, both of which have a tax-free allowance. For dividends, this is £5,000 in 2017-18, and £2,000 in 2018-19. It’s a helpful way to top up your take-home pay without increasing your bill from HMRC. Beyond this, you’ll pay 7.5% as a basic rate taxpayer, or 32.5% as a higher rate taxpayer – a significant saving on the 20% and 40% respective rates of income tax.
2. Reduce emissions and log your mileage
2017 brought huge changes to the way in which vehicles are taxed. Any car registered after April last year has to pay £140 (for petrol and diesel engines) or £130 (for hybrid models) in road tax annually. Zero-emission vehicles, on the other hand, pay nothing for the first year. So if you’re thinking of switching cars in 2018, consider going green.
But our road-worthy tips to reduce your tax bill in 2018 don’t end there: by keeping track of your business mileage, you can build up a healthy deduction on your Self Assessment if your employer’s rates are less than HMRC’s. Check out GOV.UK’s approved mileage rates to see if you could claim tax relief on any shortfall.
3. Claim tax relief on charitable donations through Gift Aid
Do you donate to charities on a regular basis? Are you in the higher rate tax band? Consider reducing your tax bill in 2018 by claiming back the tax you pay through Gift Aid. A relief of 20% applies as long as your donations don’t exceed four times the amount of tax you’ve paid in the last financial period. Tax software like SimpleTax can help you itemise it.
4. Explore your Marriage Allowance benefits
If you or your spouse/civil partner earn less than £11,500 a year you may be able to transfer some of your Personal Allowance. As long as the highest earner has a total taxable income that’s less than £45,000 (£43,000 in Scotland), this could generate savings of up to £230 a year.
5. Invest in the latest Self Assessment tax software
Everything we’ve described so far relies on knowing what you bring in, how finances are organised, and what expenses you may be entitled to. None of that is possible without staying on top of your earning model.
SimpleTax is the last of our tips to reduce your tax bill in 2018. By collecting information in real-time (based on the data you input throughout the financial period), it automates your tax obligations and finds where you can make savings.
Take advantage of our 14-day free trial, and see what SimpleTax can do for your money management. Make 2018 the year in which you rein in needless payments once and for all.