Another year, another series of money stresses… But 2019 could be different. If you’ve wasted time, money and energy on your tax management, we’re here to show you what’s possible. Because tax shouldn’t be a burden. It’s unavoidable, yet it can be made much simpler than you may realise.
Often, some core practices will make your tax submissions better than they’ve ever been. With the following advice, you’ll save funds, stay organised and will be able to get back to doing what you love. These are our top tips for those that earn outside of PAYE and are hoping for a fresh start in the year ahead.
Don’t miss the January deadline
Almost 759,000 people waited until the very last day to submit their Self Assessment tax return online. That’s an astounding number. To avoid being in the last-minute rush this year, complete everything a week or two before midnight on the 31st January – your final chance to meet the deadline.
A missed submission brings an immediate £100 penalty, with interest charged daily on subsequent delays.
Use your ISA allowance
You’re probably aware of the Personal Allowance and Dividend Allowance for your income. But cash ISA accounts are another way to reduce the tax you pay. The interest gained is free from tax if you fall below the £20,000 2018/19 ISA allowance. Every 12 months, you can top it back up to the £20k limit; the government allows you to open one annually, transferring the funds from your old account.
Flexible ISAs let you withdraw and replenish the maximum figure in the same year – they might be better if you’re keen to withdraw money for quick investments.
Know which expenses you can claim
Many taxpayers don’t know the true extent of what they’re able to claim as a legitimate business expense. These differ in relevance depending on your line of work, but leases, equipment purchase, software, training courses and more can be classed as allowable expenses, and each come with their own rules for validation.
Elsewhere, broader expenses can be claimed – there are tax breaks for vehicle mileage costs, home working bills and overnight accommodation. We suggest using a mobile tracking tool to collate everything over the financial period. GoSimpleTax is one of the best: all you have to do is take a photograph of receipts and statements on your phone. Our automated software does the rest, adding it to your Self Assessment tax return.
Take advantage of Capital Gains Tax law
Under Capital Gains Tax (CGT), you may be liable to pay a lower amount than you otherwise would based on the total amount of your taxable income – but only for certain assets that you sell for more than their initial value. This qualifies as property, shares, machinery, vehicles and professional equipment. For individuals, the 2018/19 rate is 10% and 20% on any profit. There are other rates too:
- Gains from residential property or carried interest are taxed at 18% and 28%
- Trustees or personal representatives of someone who has died are subject to a 20% rate (not including residential property)
- Gains that qualify for Entrepreneurs’ Relief are taxed at a rate of 10%
- On property where the Annual Tax on Enveloped Dwellings is paid, a 28% rate applies (tax-free allowance or Annual Exempt Amount (AEA) is not applicable)
- Companies are taxed at 20% (they are classed as a non-resident when disposing of a UK residential property)
- Remember though: you have a Personal Allowance for CGT, just like regular income – the AEA. This currently stands at £11,700. Know where you fit in when it comes to CGT and marking down a capital profit.
Make the most of your relationship status
Two people who are either married or in a civil partnership get to combine their CGT Allowance. This could equate to up to £23,400 for the coming year. If you own the asset jointly, that’s another £11,700 of tax-free funds.
Additionally, with the Marriage Allowance, one spouse can transfer £1,190 of their unused Personal Allowance to the other. This is as long as the second partner has an income between £11,851 and £46,350. It may only save a few hundred pounds, but small savings can make a huge impact.
Explore further landlord tax breaks
There are two big tax-saving initiatives for landlords in the UK. The first is the mortgage interest relief, although you only have until 2020 to use it up before government erasure. It allows you to claim 50% of mortgage payments as tax-deductible in 2018/19. For 2019/20, that falls to 25%, then it’s gone altogether. If you’re eligible, don’t lose out.
The second is zero tax on replaceable furnishings, which is in place of the old Wear and Tear Allowance. If you’re buying items such as chairs, beds, curtains, sinks and carpeting, they classify as an expense. However, they must be of an equivalent standard to that which they are replacing. A new sofa, for example, is fine – providing it roughly matches the price and specifications of the former.
Find modern software that never miscalculates
For everything we’ve described here, there’s a need to be precise, knowledgeable and meticulous if you want to get all the benefits that you’re due.
Give yourself a boost for the new year: sign up to GoSimpleTax, the mobile tax return software that logs your income and payments as they build up. Uploading expense receipts is made easy too. By applying relevant data – adding financial statements as you go – you gain more of a consistent picture of how much you’re earning. Then, when it’s time to submit, it only takes a few clicks for HMRC to receive your Self Assessment tax return.
Try GoSimpleTax for free over 14 days as 2019 gets under way. Afterwards, try our new feature – we’ve just launched a Q&A channel for any queries, either from what we’ve spoken about in our guide today or anything else you’re unsure of. Otherwise, you can reach our customer support team here.