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52 Ways to Save Tax #28

Pay less taxMillions of people across the UK like to enjoy a pint at their local pub. But did you know that if you drink very strong beer then you are also paying more tax?

In the latest part of our “52 Ways to Save Tax” guide, we look at how you reduce the amount of tax that you pay simply by switching to a weaker beer.

52 Ways to Save Tax – Part 28: Drink weaker beer

Drinkers have paid tax on beer in the UK for over three hundred years. The first beer duty was introduced in 1690 and now beer drinkers in the UK pay some of the highest tax in the world.

In 2015, British drinkers paid around 52 pence per pint in beer duty (assuming an average pint of 5 per cent ABV beer). This is compared to just 4 pence in Spain and Germany, 9 pence in Belgium and 16 pence in the Netherlands. Britons pay almost 40 per cent of all EU beer duty but only consume 12 of the beer.

In 2011, the Chancellor announced changes to the way that beer duty was calculated. As well as introducing a reduced tax rate for lower strength beer, George Osborne also increased the duty on high strength beer. The additional duty on beer with an  alcohol by volume (ABV) of over 7.5 per cent added 25p to the price of a can of ‘super strength’ lager in 2011.

Currently, the amount of beer duty that you pay depends on the beer’s strength (or ABV).

  • Strength 1.2 per cent to 2.8 per cent – 8.1 pence per litre for each % of alcohol
  • Strength 2.8 per cent to 7.5 per cent – 18.37 pence per litre for each % of alcohol
  • Strength 7.5 per cent and above – 23.85 pence per litre for each % of alcohol

The tax changes mean that a lower strength beer can now be up to 50p a pint cheaper than a high-strength alternative.

Here’s an example. If you buy a pint of 5.0 per cent strength lager, the beer duty you pay is 18.37 pence x 5.0 = 91.85 pence per litre. This works out at just over 52 pence a pint (about 568ml or 0.568 litres).

If you buy a pint of 2.7 per cent strength lager, the beer duty you pay is 8.1 pence x 2.7 = 21.87 pence per litre. This works out at around 12.5 pence per pint.

By choosing the lower strength beer you pay around 40 pence less tax on every pint that you drink.

Research has also found that the prospect of drinking weaker beer appeals to many pub-goers. A survey by the Campaign for Real Ale (CAMRA) concluded that 52 per cent of drinkers would consume a lower-strength beer if it were available in their local pub.

Drinking beer means paying less tax than drinking spirits

Drinking beer is also much more tax-efficient than drinking spirits. Currently, you pay £27.66 of ‘spirit duty’ per litre of pure alcohol.

This means that the duty you pay on a pint of 40 per cent ABV vodka is around £6.28 (compared to just 12.5 pence a pint on low-strength beer).

 

The five biggest ways to save on food shopping

save on food shopping

Guest blogger Penny Golightly shows you the most effective ways to save money when you go food shopping.

Forget supermarket loyalty points, coupons and free gifts – these are the biggest ways to reduce your monthly supermarket grocery bill.

Make a menu

Planning your meals for the week can save you a small fortune, and it’s easily one of the most effective ways to minimise your food budget. Start by checking your diary to see which days or evenings you’ll be out, then look around to see what you already have in your fridge, freezer and food cupboards to see what you can use up.

Top menu tips:

  • It’s easier to eat healthily on a budget if you plan ahead
  • Try to have a mixture of simple and complicated dishes
  • Scheduling in favourites makes you look forward to dinner time
  • Home cooking is cheaper than most convenience food
  • Cook double portions sometimes and freeze for home made ‘ready meals’

Take a shopping list

Supermarkets are very clever at selling us things we might not really need. It’s easy to be taken in by special offers that don’t offer real value, and a shopping list can help you avoid making impulse purchases. It can also help you get around the supermarket much faster if you’re shopping in person, which is a real bonus when the shop is busy.

The other great advantage of a shopping list is that you’re much less likely to forget something – having to make return trips to the supermarket can lead to further impulse purchases, so that’s good to avoid.

Learn new ways to avoid food waste

According to food experts Love Food Hate Waste, the average British person throws away 120kg of food each year, most of which is wasted needlessly. This makes a huge contribution to your regular food bill, with about £480 being wasted per person per year.

In families with children, this means about £50 is being wasted each month. That’s far, far more than you could ever save with loyalty points or coupons.

Fortunately there are many simple, effective ways to reduce this waste, such as:

  • Portion control (only cooking what you need)
  • Careful refrigeration and other storage
  • Freezing leftovers and knowing how to safely re-use them
  • Regularly checking the use-by date of food in the fridge

If you’d like to know more, have a look at Love Food Hate Waste.

Have zero brand loyalty

It’s human nature to stick with products that we know and like. The big brands know fully well that we’re creatures of habit, and they price their goods accordingly.

Fortunately most bestselling branded groceries have now have supermarket own-brand equivalents, and the majority of them are remarkably similar in taste while being significantly lower in price.

Buying new products might feel risky, but it’s easy to research them and find reviews online. Try consumer websites to see lots of people’s opinions, or visit a specialist review site, such as this one which has been set up by a food critic who says “it’s not cheap if you can’t eat it!”

Other ways to save by shopping around:

  • Many ‘value’ ranges are great, especially for rice and pasta
  • Avoid supermarket own-brand luxury ranges
  • Use budget supermarket chains sometimes
  • Buy fruit and vegetables at street markets or indoor markets

Avoid paying tax on your groceries

Well, we couldn’t have an article that didn’t mention tax in some form, could we? It’s important to remember that many foods and drinks have 20% standard-rate VAT added to their sale price, which can bump up your grocery bills considerably. Eat and drink less of them, and you’ll make big savings.

What’s on the 20% VAT list? In summary:

  • Alcoholic drinks
  • Confectionery
  • Crisps and savoury snacks
  • Home-brewing and wine-making products
  • Hot food and takeaways
  • Sports drinks
  • Items sold in catering such as ice cream, soft drinks and mineral water

Most of these taxed products aren’t good for you in large amounts (apart from water), so saving cash here might also make you healthier.

For the full list of food that attracts standard-rate VAT, see the HMRC official website.

The Replacements Of P60

You will only be given a P60 if you were working for an employer on the last day of the tax year (April 5th). If you stopped working for an employer before the last day of the tax year, you should be given a P45 instead.

A P60 is a statement given to you by your employer which shows the amount of tax that you have paid during the tax year and the amount of income that you have earned. They may be other information on your P60 include your unique PAYE tax reference number, your tax code and your name and other personal details.

There are a number of reasons why you may need a P60, they include:

  • Claiming a tax rebate
  • Child support
  • Student loan
  • Proof of earnings
  • Tax credits

How to obtain a Replacement for a Lost P60

Often people loose or are not given a P60 and need to get a replacement. It is not actually possible to obtain an actual replacement of a P60, it is possible to obtain a document that can be used as a replacement though, this document is a statement of earnings.

To obtain a statement of earnings you need to write to the payroll department of the company that you would like the replacement P60 from. We can send you a template letter which you can customise, simply send us an Email using this: template.

The company is legally required, under the data protection act, to provide a statement of earnings for any time in the last 6 years. Let us know if you have any questions in the comments below.

When can I get my tax rebate

when will i get my tax  rebate

This is one of the most common questions that we get asked at Tax Fix. This article will help answer that question for you:

When will I get my tax refund?
You need to apply to get a tax refund, you will not get them automatically. You can apply for previous years tax refunds at any time. For the current tax year, you will need to wait until the year is over in April before you can claim a tax refund.

Once you apply refunds usually take between 4-6 weeks to processed and will depend on the back log with your tax office.

How can I calculate my tax refund?
At the end of the tax year you should be given a P60 from your employer. When you have this all you need to do is input your total income and total tax into our tax rebate calculator

Press on the ‘calculate’ button and it will let you know if you are due a tax rebate.

Do tax rebates expire?
Yes, that’s why we recommend that you apply for them as soon as possible. The current expiry date is 6 years but this will be changing shortly.

 

Further Reading:

Disclaimer: The above information can not be taken as advice and is for illustration purposes only. Please call Tax Fix before making any claims or confirmation. Tax Fix can not accept any liability for action taken and any losses incurred.

Tax avoidance is a political matter that demands a solution

Corporation Tax Reminder

A lot has been written recently about tax avoidance by multinational companies.  Amazon, Google and Starbucks have been hauled before the House of Commons Public Accounts Committee and not acquitted themselves well.  At least Google’s Eric Schmidt had the courage to say that he was proud to pay so little tax.

The UK is not on its own – Amazon has been badgered into paying sales tax in a number of US states.  But as the most internet-orientated major economy, the UK has been the hardest hit and also has a massive hole in the public accounts to fill.

Why something needs to be done about it? 

Why do we need to recover tax from these giants?  And what about UK giants like Vodafone and British Sugar, the latter of which is avoiding tax in Zambia that would make so much difference to that struggling economy.  It may well be under the current international mess dealing with taxation, only companies that use such aggressive tax avoidance schemes are able to become global players.

The problem is not one of morality.  Of course big companies working world-wide will do what they can to avoid paying tax.  We would all do the same.  So rather than crying foul and ‘not fair, not fair, not fair’, instead of pushing the country into triple-dip recession by cuts to the poor in particular, the Chancellor would be well advised to realise it is not so much government spending that is the problem but government income.

It has been estimated that tax avoidance costs the UK about £25 billion a year.  That is an awful lot of money.  Just to put it in perspective, corporation tax in the UK raises about £50 billion so if all the tax avoided was also collected, the total would be increased by 50%.  Or the base rate of corporation tax could be substantially reduce.  And that’s not counting the estimated £70 billion a year of tax evaded in the UK.  These are far, far more important than tracking down the 0.7% of benefit fraud.

The raw fact is that Amazon is able to undercut any domestic competition not only because if its size but because it pays only about 2.5% tax. Similarly, Google pays 0.4% and Starbuck pays nothing at all.  And these are the ones that have been named and shamed.  How can home-grown companies, which have no option but to pay full corporation tax, compete with this?  Is the government prepared to accept the possibility that domestically grown business may shut down and everything could be run from tax havens?  Because that is the logical outcome of inactivity, which has been going on for some years now but has recently increased particularly with online business.

There is no excuse for inefficient spending in our public services but, more than equally, there is no excuse for inefficient laws and practices at HMRC.  Isn’t it much better to try to collect the tax avoided, as well as that evaded and unpaid, than to drive people into more poverty?

So here is a suggestion…

Devise a Withholding Corporation Tax to be applied to all companies with a worldwide turnover above (say) £100million – we really don’t want to hit the small guys with this.  This tax should be based either on the agreed UK component of turnover – not profit you notice – or the actual net VAT paid if that is paid at all (for example medical services are exempt and supplies are zero rated).   The basis may be, say, the greater of 10% of UK turnover and 25% of net VAT.  Special allowances such as R&D could be set against this so research-intensive companies may pay no WCT.

The rest of the corporation tax that will be due after the accounts are actually submitted will take into account any WCT already paid.  Where companies are unable – or unwilling – to produce UK-specific data, the law must include powers for HMRC to estimate the amounts.   Possession is 9/10th of the law so it will be up to the companies to prove that they have not in fact made such a profit in the UK.

If companies are using Luxemburg or Ireland to supply, then they must include the exported supplies in the equivalent of the VAT100 form.  Electronically delivered goods should of course be taxed at the level of the country to which the goods are delivered so separate account may be made for these.  This is even true for companies trading from outside the EU – they should be VAT registered and submit the tax gathered to the appropriate national body although this is difficult to police.

By initiating this sort of legislation, not only would the government collect more taxes but as this is an EU problem it would promote collaboration to ensure that the data are made available to the appropriate national authorities.

There is one subtle advantage to this, one that was enjoyed in 1944 when Pay As You Earn was introduced – the government would get a substantial portion of corporation tax a whole year earlier.  Just as we were bankrupt during WW2 and PAYE helped at a critical time, this once-off income would be big boost in these times.

Finally…

It really seems a no-brainer but then if there is little brain available in the first place, we should not be surprised that little has been done.  It is far easier to demonise single parents, the unemployed, immigrants or public service workers.

UK Income Tax in perspective

Governments past and present have frequently made much of the apparent low personal tax levels in the UK – at 20% or so our headline rate compares well with many other countries at first sight, particularly when you look over the Channel.  But is it really that low?  Or is it a political myth?

In his Autumn Statement on December 5th, George Osborne increased the personal allowance to £9449, almost hitting the £10k target adopted by the coalition in 2010.  But in increasing the personal allowance by £1340, what is given with one hand is more than taken away with the other.

Everyone gains – by £22 a month – and those who gain most pro-rata are indeed those on low incomes.  But they have also lost by the 1% cap on benefits, many of which, like Tax Credits and Housing Benefit, are paid to working families.  And of course inflation in essential goods and services like food and fuel is generally higher than headline inflation, so we live in an increasingly impoverished society where there is little hope for the low paid.

Let’s look at the total level of tax exerted on the workers – those strivers so praised by the government. But first, we need to take a trip in the history of taxation in the UK.

The straight forward system for income tax

Pay as you earn – PAYE – is a very neat idea, introduced in 1944.  You have a tax code such as 944L (the standard code from April 2013).  This means that the first £9449 that you earn in a year is free of tax.  Yup – just change the letter into a ‘9’ and that’s your tax free pay!  (The ‘official’ amount is £9445 but checking with the HMRC online tax calculator and others this is clearly wrong – it’s £9449!)  This code may change according to your circumstances – you may have essential work or other allowable expenses; perhaps you have underpaid tax in the previous year. There remains a married tax allowance for those born before 1935 but everyone else is taxed independently – in theory (although recent changes to Child Benefit is clearly an exception).  Or maybe you are over a certain age and the allowances are slightly more generous (although that is being withdrawn soon).

This tax free pay is divided equally according to how you are paid – monthly or weekly – so that for example the 944L code means the first £787.42p every month is not taxed.   But rather than deal with each month on its own, the allowance accumulates during the year as £787.42 in month 1 (April); £1574.83 in month 2 (May); £ 2362.25 in month 3 (June) and so until £9449.00 in month 12 (the following March).  Your earnings are also accumulated over the year in the same way and each month the accumulated tax owed is calculated, the tax already paid is subtracted and the result is deducted from your pay and sent to the revenue by your employers.

If your tax code is changed for any reason, the tax paid is automatically corrected and at the end of the year you have paid the right amount of tax.  If you enter higher rate, the same principle is applied so that if you slip back in earnings – or lose your job – the tax is always correct.  It is a very neat idea.

The complications

To begin with, there are a series of ‘clawbacks’ to be applied to your income tax, like student loan, tax credit and personal allowance for those earning over £100k. Another ‘clawback’ is the child benefit where one partner earns between £50k and £60k; this can lead to a marginal tax of over 100%.  Recently the Insititute of Fiscal Studies has also discovered this fact – although it has been misguidedly reported as ‘some having a marginal tax rate of 65%’.

Then, oh dear, there is National Insurance.  This was originally meant to pay for benefits and health but now is just another tax under a different name and is the second largest contributor to the Treasury after income tax.

NI applies to pay as and when it is received.  It is more complex because it depends on pension arrangements but in annualised terms it is 12% above £7592 a year and 2% above £42484 (2012/13 figures).  From your National Insurance, there are all sorts of fairly minor reductions – statutory sick pay, maternity pay, paternity pay, adoption pay and NI compensation on these plus NI holiday claimed.  It is an unholy mess really and almost impossible to check if your affairs are in the slightest bit awkward.

So while the headline basic tax rate is 20%, you actually pay up to 32% marginal tax and NI.  As your employer also pays up to 13.8%, the total deductions are up to 51.8% while you are on lower rate or 55.8% if you are on higher rate tax because the employer’s contribution is not limited!  And above £150k, the totals are 65.8% (down to 60.8% in 2013).

Is this low tax?

Not getting the results you expected

Not getting the results you expected from our tax rebate calculator?

Follow our step by step guide to see where things might be going wrong:

Are you inputting the correct income?

 

  • Use your P60/P45 to help you input the correct income for the year. If you do not have a P60 or P45 you can use your pay slips or write to your employer and ask them for a statement of earnings, they are required by law to provide this.

 

  • The income that you input should be the ‘before tax’ amount, not the amount that you actually receive each month in your bank account.

 

  • Your income should be the amount that you earn between April 6th and April 5th of the next year. So if you were looking to check your tax rebate for the 2011/2012 tax year you would input all your income between April 6th 2011 and April 5th 2012.

 

  • The amount that you earned in the tax year may be different from your annual salary. For example your employer may pay you £30,000 per year. However if you started working part way through the tax year or stopped working before the tax year ended your income may be less than your £30,000 salary.
  • Remember to include all income, including job seekers allowance or any other benefits that you may have received.

 

Are you inputting the correct amount of tax?

 

  • Check your P45, P60 or statement of earnings for the amount of tax that you paid through your employer.

 

  • Only include PAYE tax, not national insurance or any other deduction that you might consider to be a tax.

 

Which tax year are you checking for?

 

  • If you are checking for the current tax year you will only be able to claim a tax refund if you have stopped working and will not work again until the end of the tax year (April 5th), for example if you are leaving the UK.

 

  • If you have wait too long you may have missed the 4 year limit to make a claim.

 

  • You can reconcile using our tax calculator why you aren’t getting the results you are expecting with our tax refund calculator. Input your income and it will tell you how much tax you should be paying.

Which countries pay the most tax

Related Infographics: Which Jobs Pay the Most Tax

Need to Pay U.S. Income Taxes?

The U.S. Tax Code is an immense and complex thing. Depending on your types of income and other individual circumstances, a tax return can be challenging to prepare. Doing your taxes online reduces errors and spares you from the headache of selecting the right tax forms to file. In all respects, efile (as it’s been referred to), is a better way to prepare and file your taxes in the United States. So say goodbye to old-fashioned paper filing and file your taxes online. Learn more about how to efile your taxes.

Here are ten good reasons why you should prepare and efile your Federal Incomes Taxes online:

10. Nearly 70% of U.S. Taxpayers efiled

In 2010 (for tax year 2009), almost 70% of all U.S. taxpayers efiled their taxes. That’s almost 100 million taxpayers! Every year, more and more people discover the advantages of efiling.

9. No Need to Select Tax Forms

If you don’t know U.S. tax laws, you don’t want to be picking tax forms all on your own. The efile tax software will do this for you based on the tax answers you give during an online interview. Once you enter a little information, the efile software will generate the correct forms for you and even put them in the proper sequence. All you need to do is enter the amounts, names, etc. where the software tells you.

8. Convenience and Online Help

You can “test drive” the software before you create an account; many online tax help and support features are also available. The online software, with it’s built-in error checking features, will assist you and check for any potential mistakes or missing information. When you are ready to efile, you will go through a simple checkout process. You will be emailed about the status of your tax return. Access your tax return at anytime, from wherever you have access to a browser and the Internet.

7. Security

Electronic filing is safer and more secure than “traditional” paper filing. Why? efiling is more secure because your return will be encrypted and safely transmitted to the Internal Revenue Service. If you choose direct deposit, your refund can be transmitted directly to your bank account by the U.S. Treasury Department. With efile, there is nothing in the post to get lost or stolen. IRS-efile safeguards privacy and personal tax data.

6. Tax Return Accuracy

Efiling is more accurate than doing a tax return on paper because the tax software drastically reduces filing and math errors. The IRS says paper tax returns have an average error rate of 20%, but efiled tax returns have an average error rate of only 1%. The efile tax software will perform all the necessary calculations for you, so there are no math errors to be made, and it will let you know if you are missing any necessary information on your tax forms.

5. Tax Return Status and Feedback

If there is an entry error on your paper-filed return, you will have to wait for a letter in the post. With efile, you will know about any errors immediately, and a site like efile.com will give you support to help you fix any problems. Also, when you efile, you will know as soon as your return is accepted, and you can track the status of your tax refund online.

4. efile Is Less Taxing

efiling your taxes is indeed less taxing for you. It saves time and reduces your workload as well as your frustration level! The efile software automatically pre-fills your information in every form you need, so you don’t have to type the same thing over and over again. Once you enter figures such as your income, the information flows into all the other forms that require it. And after you have entered all of your information, you can import it into your returns in future years, further cutting down your workload.

3. Biggest Refund Guaranteed

Based on the information you enter during the online tax preparation process, the efile software will calculate the biggest possible tax refund available to you. On a paper return, it’s easy to miss a form or a line item. Use efile and claim all the credits and deductions that you deserve. Avoid having to amend your return later–efile.com guarantees you the biggest tax refund allowed by law on any tax return prepared on efile.com and accepted by the IRS.

2. Get Your Refund Faster

Get your tax refund the fastest possible way – deposited right into your bank account. During your online tax preparation, simply choose to have your federal and state tax refund direct deposited into your bank account. If you efile and use direct deposit, you can even receive your refund in as few as 8 days.

1. FREE efile

You can prepare and efile a simple tax return for free. If your tax return can be filed on a Form 1040EZ, there will be absolutely no charge for federal tax preparation and efiling on efile.com. Find out if you qualify for the efile.com FREE FEDERAL EDITION.

Getting started is simple. Just create a free account and start your tax return online now at efile.com.

Inland Revenue Tax Returns for 2011


When you work for a company and pay your tax through PAYE , you usually will not have to undertake the laborious process of completing a self assessment tax return. However, if you run your own business, an organization director or for those who have earnings coming from real estate, retirement benefits or assets, you might have to submit a tax return, and just so that you know, the deadline is fast approaching!

Completing your taxes doesn’t have to be a complicated practice. Just follow some of the tips in our guide below:

Do you have to complete a tax return For 2011?

Not everybody would need to submit a tax return with HMRC.. Typically the most frequently found factors that would require you to complete a tax return in 2011 are:

•             You are self employed or a sole trader

•             You have got income from abroad that happen to be liable to tax here in the UK.

•             You owe Capital Gains Tax from the sale of a property or shares

•             You have income of over £10,000 coming from property or savings/investments

Completing your Tax Return

In the event that you are required by the Inland Revenue to complete a tax return , you’ve got two options of how you are going to do this. The first option is to complete a traditional paper based tax return, the deadline for which is ealier. The alternative options it complete your tax return online, where you liability for tax will be calculated for you and you will be given three months extra time to complete it. If you would like to complete your tax return online you will need to register with HMRC, if you are using a tax return accountant they will be able to complete the online tax return procerss for you.If you choose to submit your tax return online you will get an extra three months in which to file your return. Your tax will be calculated automatically and you will also receive an acknowledgement that HMRC have received the return.

Your Two Options

The self assessment tax return 2011 has two main sections within it:

•             Core pages which everybody needs to fill out

•             Supplementary/additional sheets

You need to complete all of the additional pages that may be relevant for your specific scenarios. Most of these documents consist of earnings coming from real estate, earnings as a result of saving interest as well as assets, CGT and and income that you may have from a pension.

Regardless of whether you actually complete a paper based tax return or you use the online option, you will need to make sure that you have submitted every one of the applicable pages. In cases where it’s a paper based tax return, don’t fail to remember to sign and date it, as this is one of the most common errors that HMRC sees.

Don’t forget the Tax Return Deadline

The due date to complete your tax return by is:

•             Paper based tax returns – 31st October (or three months from the time the Inland Revenue sent you a notice to complete a tax return ) whichever may be the later

•             Online tax returns – 31st January (or three months from the day of your notice to complete a tax return) whatever may be the later

Remember, if you fail to complete your tax return by the dates above, there i an automatic penalty of £100, so get yourself organise and complete your tax return today.

How do I complete a tax return?

You’ll be able to complete a tax return yourself if you know how or if you follow the guidance of the Inland Revenue. Otherwise you can make use of a tax return professional who’ll complete the return on your behalf. Click on the link if you would like help completing your self assessment tax return online