Reducing the taxman’s take

To minimise the tax you pay, it’s important to be fully aware of the choices you can make before you make them, so planning ahead and taking professional financial advice is essential, we at Hutt Professional have financial advisers with many years of experience who would be more than happy to offer you the professional advice you need. With real-terms tax increases the prospect for the foreseeable future, it makes sense to utilise every available tax relief.

HM Revenue & Customs (HMRC) creates many legitimate opportunities for you to reduce the amount of tax you pay. However, you may not be aware of them all, or you may be unsure of how to take advantage of them.

Here are examples of the ways in which legitimate planning may save you money by reducing your tax bills.

Do you have the correct PAYE tax code?
PAYE tax codes can be incorrect when issued. HMRC may have included an estimate of your unearned income, which means you will pay tax on that income earlier than you would if it was assessed through your self-assessment tax return. You can ask HMRC to remove this estimated income and also correct any other errors.

Could you use the new transferable amount of personal allowance?
In tax year 2015/16, married couples and registered civil partners can share some of their personal allowance between them. The unused allowance of one partner can be used by the other, meaning an overall tax saving for the couple. The amount you can transfer is capped at £1,060 for tax year 2015/16 (10% of the personal allowance), and a transfer is not permitted if either partner is a higher or additional rate taxpayer.

If you own more than one residential property, have you informed HMRC which of your properties should be treated as your main home for tax purposes?
The property that has always been your main home is free of CGT. Any other property where you have lived for part of the time will attract a tax exemption for the periods you have lived there and have elected for it to be your main home. If a property has been your nominated main home at any time, the gain for the last 18 months of ownership (36 months if moving into care) is free of tax, even if you do not live there during that final period. The position may become even more complicated if you have an overseas property.

Have you taken advantage of your 2015/16 Individual Savings Account (ISA) allowance?
The maximum annual amount you can save or invest in an ISA is £15,240 (tax year 2015/16) which is free of income and capital gains. You can put the whole amount into a Cash ISA, a Stocks & Shares ISA or any combination of the two. You may also be eligible for a Help to Buy ISA if you are saving to buy your first home. The Government will boost your savings by 25%, so, for every £200 you save, you’ll receive a government bonus of £50. The maximum government bonus you can receive is £3,000. In your first month, you can deposit a lump sum of up to £1,200. The minimum government bonus is £400, meaning that you need to have saved at least £1,600 into your Help to Buy ISA before you can claim your bonus. When you are in the process of buying your first home, your solicitor or conveyancer will apply for your government bonus.

Are you taking advantage of your annual allowance for making pension contributions?
Your annual allowance for tax year 2015/16 is £40,000 (up to £80,000 for some people) plus any unused allowance brought forward from the previous three tax years. This allowance must cover any pension contributions you make yourself and any contributions paid for you by your employer. Contributions made in excess of your annual allowance will attract a tax charge at your marginal tax rate. Commencing from tax year 2016/17, the annual allowance for those with income above £150,000 is to be reduced on a tapering basis so that it reduces to £10,000 for those with income above £210,000. For every £2 of income above £150,000, an individual’s annual allowance will reduce by £1 down to a minimum of £10,000.

If you wish to seek independent financial advice on tax matters then we at Hutt Professional, have financial advisers with many years of experience who would be more than happy to offer you the independent financial advice that you need. If you are located in Leamington Spa or surrounding areas please do not hesitate to contact us as we would be more than happy to provide you with your own financial adviser who suits you best.