:: Pay less tax ::

52 Ways To Save Tax #31

Pay less taxEven if you have taken all the steps possible to reduce the amount of tax that you pay, you could still end up paying too much. If you have overpaid, there are ways in which you can obtain a tax rebate and get back the money that is due to you.

In the latest part of our “52 Ways to Save Tax” series, we look at how you pay less tax by claiming back overpaid money that you’re owed.

52 Ways to Save Tax – Part 31: Claim back the tax you have overpaid

There are a number of reasons why you might have paid too much tax. These include:

  • Your employer has deducted too much tax from your pay
  • You are on a low income and you have paid tax on savings interest
  • You sent a tax return and have paid too much tax
  • You have used your own money for your job (for example on work clothing or fuel)
  • You live in one country and have an income in another
  • You were on the wrong tax code for part of the tax year

Claiming back overpaid tax if you’re on PAYE

If too much tax was taken from your PAYE income, you may be able to claim a refund. How you make a claim depends on the tax year in which you paid too much tax. You can make a claim for a tax rebate back to the 2013/14 tax year.

  • 2017/18 tax year – Tell HMRC if your tax code is wrong. If you are due a tax refund, your employer will give you this in your pay.
  • 2016/17 tax year – HMRC will post you a P800 tax calculation if they know you have paid too much tax. You can either claim your refund online or you may receive a cheque.
  • 2015/16 and earlier tax years – You may be able to claim online. You will need your employer’s PAYE number (this is on your P60) and details of any table income/benefits you received.

Claiming back overpaid tax if you sent a tax return

If you submit a tax return, you may still have paid too much tax. You may have:

  • Entered the wrong amount when you paid your tax bill
  • Made a chance to your tax return after you submitted it
  • Stopped being self-employed and have payments on account

If you submitted your tax return online you should log into your HMRC account and ‘request a repayment’ of the tax you have overpaid.

If you submitted a paper tax return, you should call or write to HMRC and explain why you think you paid too much tax. Include your Unique Taxpayer Reference when you write, and you may also need your bank details in order that your tax rebate can be paid directly into your UK bank account.

Tax Fix can help you get the tax rebate that you are owed. Get in touch with us today to find out how we can help.

52 Ways To Save Tax #14

There are lots of ways that you can reduce the amount of tax that you can pay. And, with a range of different taxes affecting everything from your income to your insurance, the ways of mitigating the tax that you pay vary depending on the type of tax.

Capital Gains Tax can be charged on the profit or gain made when you sell, gift, transfer, exchange or dispose of an asset. If you’re a higher rate taxpayer then you can face a tax bill of up to 28 per cent but there are ways to reduce the amount that you pay.

Keep reading to find out how transferring assets that you own into joint names or into the name of your spouse/partner can help you to reduce the amount of Capital Gains Tax that you pay.

52 Ways to Save Tax – Part 14 : Transfer assets to your spouse/partner

Capital Gains Tax (CGT) is payable on the profit that you make when you sell or gift an asset. And, like other types of tax, each individual has an annual personal CGT allowance.

John Fletcher, director of financial planning at Brewin Dolphin, explains: “Each individual has a personal CGT allowance every year (6 April to 5 April), which for many investors is sufficient for avoiding a CGT liability.

“Any gains in excess of the allowance are charged to CGT at either 18 per cent or 28 per cent, depending on the individual’s other total taxable income in the year the gain arises.”

The current personal CGT allowance (tax year 2015/16) is £11,100 and this applies when you sell assets such as shares or a house. It effectively means that in the 2015/16 tax year you can make a profit of £11,100 on an asset (or assets) before you pay any tax on the gain.

One way to reduce the amount of CGT that you pay is to consider transferring assets into joint names or to your spouse or partner’s name. Transfer between spouses is currently exempt from CGT which means that assets can be transferred between husband and wife or civil partners so that both annual CGT allowances are used.

By transferring an asset into your joint names, you can both make use of your tax-free CGT allowance so that up to £22,200 of any gain can be tax-free in 2015-16. For example, transferring a rental property into joint names means that you can benefit from £22,200 ‘tax free gain’ when you come to sell the asset.

Remember that the transfer to your spouse or partner must be a genuine outright gift.

Mel Kenny of advisers Radcliffe & Newlands says: “Those in poor health may have worries about their financial planning and paying too much tax.

“One consideration for married couples with big gains sitting on their assets is to transfer these assets of the spouse in good health to the spouse in poor health so that capital gains are wiped out on death and the value is rebased from that date.”

52 Ways To Save Tax #13

Pay less tax

Pay less tax by sending in your tax return on time

In our series we’ve been looking at easy ways for you to reduce the amount of tax that you pay. As well as using legitimate means to cut your tax bill, making sure you are organised and that you file your tax return on time can also help trim the amount you owe HMRC.

Keep reading to find out how paying your tax bill on time can save you hundreds of pounds.

52 Ways to Save Tax – Part 13 : Pay your tax on time

If you have to submit a self-assessment tax return then there are deadlines for sending in your information. These are:

  • Paper tax return – midnight on 31 October
  • Online tax return – midnight on 31 January

For example, for the tax year that ended on 5 April 2015 you have to submit your paper tax return by 31 October 2015 or your online tax return by 31 January 2016.

You also have to pay any tax that you owe by the 31 January deadline.

If you don’t file your tax return on time, you will face a penalty. You’ll get a penalty of £100 if your tax return is up to 3 months late and you will have to pay more if it’s later, or if you pay your tax bill late.

If you take longer to submit your return you can face a daily £10 penalty – which is capped at 90 days, or £900 – as well as interest on the amount outstanding.

HMRC figures show that 890,000 people missed the 31 January 2015 deadline for submitting their self-assessment tax returns, immediately adding £100 to the bill of almost a million people.

In some cases HMRC will waive the penalty. Reasonable excuses for failing to meet the submission deadline include:

  • the death of a partner
  • an unexpected stay in hospital
  • issues with the online HMRC service
  • fire
  • unpredicted postal delays
  • computer or software failure when preparing your tax return

In these cases HMRC may waive your penalty. Reports in May 2015 suggested that HMRC were waiving more of the penalties than normal if people provided a reasonable reason why they did not submit their tax return on time. However, simply submitting late may still see you pay at least £100 more than you have to.

Paying a surcharge on your VAT

It’s not just your income tax bill that may go up if you don’t pay on time. If you’re a VAT registered business then you can also face penalties if you don’t pay your VAT by the deadline.

HM Revenue and Customs (HMRC) record a ‘default’ if:

  • they don’t receive your VAT return by the deadline
  • full payment for the VAT due on your return hasn’t reached their account by the deadline

If you default you may enter a 12 month ‘surcharge’ period and if you default again during that period you could face a penalty.

For example, if you have a turnover of less than £150,000 you can face a 2% VAT surcharge if you default three times during a 12 month period.

You can also face a £400 fine for sending in a paper VAT return unless HMRC has told you that you are exempt from online submission.

All this means one thing: if you send your tax returns on time and make payments when they are due your tax bill will end up being lower.

52 Ways To Save Tax #12

SavingsOne of the major announcements in George Osborne’s 2015 Budget concerned the way in which savings interest would be taxed from April 2016. There are going to be significant changes to the tax regime on cash savings that will benefit the vast majority of taxpayers in the UK.

Keep reading to find out how putting you money in savings can reduce your tax bill and save you hundreds of pounds a year.

52 Ways to Save Tax – Part 12 : Put your money in a savings account

If you have some of your savings in a High Street savings account then you could be set to benefit from one of the new measures announced by the Chancellor in his 2015 Budget speech.

From April 2016, every basic rate taxpayer in the UK will be able to earn £1,000 in savings interest each year without having to pay any tax. Higher rate taxpayers will be able to earn up to £500 in savings interest.

The change is set to help around 28 million savers avoid tax on their money. It means that for around 95 per cent of savers, all the interest they receive on their savings will be paid without any tax being deducted – effectively giving a 20 per cent boost.

At present, banks and building societies deduct the basic tax rate of 20 per cent before paying your interest. If you don’t pay tax then you can register to receive your interest tax-free (using a R85 form) while if you’re a higher or additional rate taxpayer then you have to declare interest on your tax return and pay even more tax.

At present, if you are a basic rate taxpayer and you have £20,000 in a High Street savings account paying 2 per cent interest you would only earn £320 a year in interest. A higher-rate taxpayer would earn £240 and a top-rate taxpayer £220.

When the changes come into force in April 2016, you would earn £400 in interest.

The changes from April 2016

From the start of the tax year – April 6, 2016 – banks and building societies will stop automatically deducting interest from your savings. All the interest you receive will be paid tax-free.

If you earn below £16,800 a year you won’t have to pay any tax on savings interest. If you earn between £16,801 and £42,700 you will be allowed to earn £1,000 in interest without any tax being deducted.

If you earn between £42,701 to £150,000 you will have a £500 allowance  and if you earn more than this you will have to pay tax on your savings interest.

If you are a basic taxpayer it effectively means that you can have up to around £70,000 in an easy-access savings account (assuming a current interest rate of around 1.35 per cent) and earn itnerest without paying any tax.

By investing more of your cash in savings accounts from April it means that you will avoid the 20 per cent deduction and help you to reduce your tax bill.

52 Ways to Save Tax #11

Inheritance Tax is paid if a person’s estate (their property, money and possessions) is worth more than £325,000 when they die. Currently charged at a rate of 40 per cent, an inheritance tax bill on a large estate can run into tens or even hundreds of thousands of pounds.

However, there are ways of reducing your inheritance tax liability by making gifts while you are alive. In the next part of our series ‘52 Ways to Save Tax’ we look how you can pay less tax by giving money away. Keep reading to find out more.

52 Ways to Save Tax – Part 11: Give money away

There are several ways of making gifts and reducing your potential tax bill. These include:

Giving small gifts

In each tax year, you can gift up to £250 to as many people as you like, completely free of Inheritance Tax. Wedding gifts and individual gifts up to this amount can be given to as many different people as you wish.

Remember that you can’t give a larger sum of money and claim exemption for the first £250.

Give up to £3,000 every year

As well as the individual £250 gift limit you can also give away £3,000 in total each tax year – although you can’t combine these two allowances with gifts to the same person.

The estate won’t pay any Inheritance Tax on up to £3,000 worth of gifts given away by the deceased in each tax year (6 April to 5 April). This is called your ‘annual exemption’.

If you don’t use your annual exemption you can carry it over into the next tax year, but the maximum exemption is £6,000.

Give a wedding gift

Wedding or civil partnership ceremony gifts are also exempt from inheritance tax – although there are limits to this:

  • Parents can each give cash or gifts worth up to £5,000
  • Grandparents and great grandparents can each give cash or gifts worth up to £2,500
  • Anyone else can give cash or gifts worth £1,000

In order to qualify for this exemption you will need to give this gift (or promise to give it) on or shortly before the date of the wedding or civil partnership ceremony.

Give regular gifts from your income

There is no Inheritance Tax to pay on gifts from the deceased’s income (after they paid tax) as long as they had enough money to maintain their normal lifestyle. Such gifts may include:

  • Christmas, birthday and wedding/civil partnership anniversary presents
  • Life insurance policy premiums
  • Regular payments into a savings account

Give a gift to charity or a political party

Gifts to UK charities are also tax-free. The deceased person’s estate will pay Inheritance Tax on gifts to charities, museums, universities or community amateur sports clubs.

In addition, there is no Inheritance Tax to pay on a gift to a political party as long as they have either:

  • 2 members elected to the House of Commons
  • 1 member elected to the House of Commons and received at least 150,000 votes in a general election

52 Ways to Save Tax #10

If you sell an asset for a profit then you may have to pay tax on the money that you make. This is called ‘Capital Gains Tax’ and could leave you with a sizeable tax bill if you sell shares, antiques or investment property for a profit.

In the next part of our series ‘52 Ways to Save Tax’ we look how you can pay less tax by using your annual Capital Gains Tax allowances. Keep reading to find out more.

52 Ways to Save Tax – Part 10: Use your Capital Gains Tax allowance

Capital Gains Tax (CGT) is the tax that you pay on the profit that you make when you dispose of an asset. Remember that any tax that is due is paid on the ‘gain’, not the whole amount you sell the asset for.

For example, you buy a painting for £10,000 and sell it for £50,000. The ‘gain’ you make is £40,000 and any CGT that is due would be paid on this amount.

It is not just selling an asset that creates a potential Capital Gains Tax liability. You may also have to pay tax if you gift an item to someone else, swap it for another asset or if you got compensated for it (for example if you received an insurance payout because an asset was destroyed).

When you may have to pay Capital Gains Tax

You may have to pay Capital Gains Tax if you make a profit (‘gain’) when you sell/dispose of a personal possession for £6,000 or more. Assets on which CGT may be payable include:

  • Jewellery
  • Paintings
  • Shares not held in an ISA or PEP
  • Antiques
  • Stamps and coins
  • Property that is not your main residence

When you don’t pay Capital Gains Tax

There are certain items that are exempt from Capital Gains Tax and certain annual exemptions that you can use. These will help you to dispose of an asset on which you have made a gain without having to pay any tax.

You don’t pay CGT on:

  • NISAs, ISAs or PEPs
  • Betting, lottery or pools winnings
  • UK Government gilts
  • Premium bonds
  • Personal possessions with a lifespan of less than 50 years
  • Most gifts to your husband, wife, civil partner or a charity
  • Your car – unless you’ve used it for business

You also have an annual Capital Gains Tax allowance, called the Annual Exempt Amount. This means that you only have to pay Capital Gains Tax on your overall gains above your tax-free allowance which, in the tax year 2014/15, was £11,000.

Working out your gains

You won’t pay any Capital Gains Tax if your total taxable gains are below your annual Capital Gains Tax allowance (£11,000 in the 2014/15 tax year). To work out what your gains are you should:

  • Work out the gain you have made on each asset that you have disposed of in the last tax year (shares, personal possessions etc)
  • Add together the gains to make a total
  • Deduct any allowable losses

If your total gains are below your allowance you won’t have any Capital Gains Tax to pay.

If your gain is above the CGT allowance then you will have some tax to pay. The basic rate of CGT is 18 per cent although higher rate taxpayers – which may include you if your gains added to your other income carry you into the higher band – pay 28 per cent.