Personal Taxes are a bind, but an unavoidable one if, as individuals, we want to remain in compliance with HMRC and avoid penalties, fines, and in some cases, prison time. However, as much as most of us hate filing our tax returns and stress out about it every time tax season rolls around, there is one simple and cost-effective way to make the entire process simpler and even save money: hire an accountant.
With an accountant’s expert guidance, you can legitimately pay less on your personal taxes, and with the money that you might save, you could even end up covering the costs of your accountant’s fees.
Below are 7 ways that an accountant can help you to pay less on your personal taxes:
- Paying less personal taxes on your income
With your personal allowance, the first £12,570 of your income – which can include your salary, bonuses, rental and pension income – is tax-free, and if you’re not already using yours, an accountant can help you find out if there are any ways to increase your income.
- Avoiding the 60% tax trap
For those individuals earning above £100,000, their tax-free allowance is reduced, and for every £2 you earn above £100,000, they will lose £1 of their personal allowance; this is commonly referred to as the ‘60% tax trap’. However, there are ways to save personal taxes and national insurance by sacrificing your bonus and having it paid into your pension.
- Reducing your capital gains tax bill
Paid when selling an investment or property for a profit, capital gains tax can become costly, but while a lot will depend upon your income, there are ways to reduce your capital gains tax bill.
- Minimising capital gains tax on restricted stock units
If you have shares in the company you work for, these are known as Restricted Stock Shares and holding them may mean you have to pay capital gains tax. However, there are 2 ways to minimise this amount: by immediate sale and spousal transfer, both of which an accountant can explain to you in more detail.
- Reducing your company tax bill
Corporation tax is paid by anyone owning a business that makes a profit, but with employer pension contributions treated as a deductible expense, you can reduce your corporation tax. An accountant may advise you to make a pension contribution of £10,000 to save as much as £4,530 in tax compared to paying yourself a salary.
- Lowering your income tax bill
If you earn more than £12,570, you’ll pay personal taxes on those earnings, but there are several ways to reduce your income and pay less tax. While the most common way is to pay money into a pension, an accountant can advise you of other ways to legitimately lower your income tax bill.
- Avoiding the lifetime allowance tax charge
A lifetime allowance tax charge is paid if the value of a pension exceeds the Pension Lifetime Allowance, but there are some ways to minimise this charge, which can include:
- Applying for pension lifetime allowance protection
- Taking your defined benefit pension early
- Setting up an alternative investment pot and a few more that a qualified accountant can help you with.
Tax planning and compliance doesn’t have to be a huge headache every year; to simplify the process and reduce your tax liability, seek help from an experienced accountancy firm.
|If you need advice on personal taxes, please do not hesitate to contact us.