The amount of taxes that you will need to pay can be significantly affected by income tax planning, and you can often enjoy a lower tax bill if you plan carefully. Other types of tax, such as inheritance tax and capital gains tax can also make a difference to the amount that you have to pay.
The following information can potentially make a big difference to what you owe, and you should research these issues when looking at your business taxes, regardless of the size of your business.
There are two main areas where you can expect to enjoy significant tax savings:
It always pays to take advantage of any tax advantages that your employer might provide to you, such as an incentive scheme for employees. Determining what the value of these benefits is you should be an important part of your income tax planning. There can often be a large tax charge when it comes to company cars, and it's important to plan for income tax in these areas.
Tax relief for contributions to pension plans, either form those made by you or your employer, should also be taken into account when planning for income tax. One of the most valuable benefits that your employer can give you is a final salary occupational pension plan.
Maintaining comprehensive and easy to access records, as well as planning to do next year's tax return are both an important part of basic income tax planning. A self assessment tax return has to be filed by those who are considered to be high earning, company directors and anyone self employed, as well as by anyone whose tax situation is complex.
Income Tax Savings Planning
Eliminating or at least reducing income tax or capital gains tax by transferring your savings to your spouse is just one of the things to focus on to save when planning income tax. Another effective way to save is by using an ISA.
A pension contribution on behalf of child, or an investment in a venture capital trust that qualifies for the Enterprise Investment Scheme are other ways for high income individuals to save.
Capital gains tax is not assessed on your home, although if you buy a home you will probably pay both stamp duty and council tax. However, if own a second home as an investment, or you make money from the rental of the home, you may have to pay capital gains tax. You should also take into account your likelihood of having to pay capital gains tax. Taxes can be complex when it comes to property, meaning that thorough income tax planning is essential.