The UK offers a number of generous tax reliefs to those who wish to reduce their liabilities, but with so much on offer, it is easy to get confused and to miss out on all of the opportunities available.
Nevertheless, if you haven’t thought enough about tax planning, you are by no means alone.
A recent study found that almost three-quarters of UK taxpayers have not done enough to reduce ‘tax waste’ in the last year.
With the end of the tax year edging ever-closer, now is the perfect time to reconsider your tax planning and explore whether or not you are paying the right amount of tax.
When it comes to personal tax, a broad range of reliefs and allowances can be applied to the likes of Capital Gains Tax (CGT), business tax and Inheritance Tax (IHT), and each of these should be carefully considered.
CGT, for example, has a reputation for leaving people with a hefty tax bill on disposal of valuable assets. However, careful planning about how and when an asset is disposed of can have a major impact on the size of the bill. Likewise, making careful use of other allowances can see your tax bills shrink considerably.
When it comes to IHT, there are a similarly wide range of allowances and reliefs to take advantage of, whether in the form of the Residence Nil-Rate Band (RNRB) – which provides an additional tax-free allowance if you leave your main home to direct descendants – or by leaving money to charity, which is exempt from IHT. This means it makes sense to draft your Will with a view to your IHT liabilities.
It is also wise to consider Married Couples’ Allowance and any other helpful tax reliefs which might be appropriate, depending on your situation.
Business taxes have potentially an even greater scope to benefit from careful tax planning, with how you structure your business having a major impact, as well as how you acquire new businesses and finance expansion.
Taken together, the potential savings for an individual and their business can stretch into the tens or even hundreds of thousands of pounds and beyond, depending on their income.
This means it will come as no surprise that up-to-date research suggests that UK taxpayers are paying £4.9 billion more in tax than they should.
The best way to make sure you are tax-efficient is to periodically review your tax planning and to reassess your liabilities each time your circumstances change, whether in your personal or business life.
For specialist help and advice regarding tax planning, contact our expert team at Knights Lowe today.