If that sounds like you – perhaps you’ve just done your tax return and are thinking ‘the taxman is going to love me!’ then something needs to be done.
After all, the money is better off in your pocket than it is theirs. In fact, when it comes to inheritance tax, some of you love the tax man more than your own families!
Now that’s not right!
So, to show the taxman the door this Valentine’s day rather than handing over wads of your hard earned money, then now’s the time to get planning, so that next year, the taxman finds himself living in Dumpsville.
Here are some things for you to consider to reduce your tax liability (legally of course!):
- ISAs – tax free saving is a no-brainer, and the allowance keeps getting bigger! It’s now standing at £20,000. There is also a lifetime Isa (or Lisa) which is aimed at under 40s to allow them to save for their retirement with a Government bonus of 25%. An easy way to make the most of your savings
- Give to charity – higher rate tax payers can use their tax relief on charitable giving, so rather than showing the tax man some love this Valentine’s, give it to charity instead!
- Pensions – these are the most tax efficient form of saving, so get paying in! You can even set up pensions on behalf of children now too, so get them understanding the importance of saving young. Oh, and don’t forget, from February, all new employers will now have to offer auto-enrolment into pensions, so you have no excuse not to use this vehicle to reduce your tax bill!
- IHT – love your family! Good news that IHT has been scrapped on family homes for up to £1m, there is also the 7 year rule, for any gifts that you give away, they will be exempt from IHT if you live for 7 years afterwards. So share the love with your family, and reduce your IHT bill at the same time
- Digital tax – if you sell things through eBay or rent out a room through sites like Airbnb, then there are two separate allowances of £1000 each for these two activities, so might be worth exploring
- Salary sacrifice – also known as pay for perks, there are possibly opportunities for you to give up some of your salary towards things like pensions, childcare, even cycle to work schemes which will let you reduce tax on your income
- Property – buying an additional property can work in your favour. For example, there will be capital gains tax break on the main residence. And you can also ‘flip’ properties, switching which property is the main residence which can also save tax, but it’s important to get proper advice to ensure you stay within the rules, and don’t go outside of the restrictions
- Become a landlord – if you rent out a room in your property, you can claim £7,500 tax free on the income you receive – this was increased in 2016, so make the most of it. Get the paintbrush out and spruce up that spare room
So there you have it, the taxman’s going to feel a bit lonelier this year – not being showered with all your cash!
But remember to seek professional advice on the above, you need to ensure that the measures are right for your situation.
And get writing those Valentine’s cards for your family instead – in fact, splash out on some roses too with that extra cash you’ve now got!