Added by Jon Davies
When you filed your 2012 tax return in January, were you left thinking “if only…..”? If only you had planned in advance, you could have paid a lot less tax. Well, it might seem only moments since you filed that tax return, but now is the perfect time to plan for the 5 April 2013 year-end and avoid that “if only…” moment next year.
With a month to go to the end of the current tax year, we’re going to use this week to bring you our Top 5 Tips for reducing your personal tax bill by taking action this month.
The key thing is to read these and, where appropriate, act on them!
So, without any delay, here’s Tip number 1.
Year-end tax tip 1 – Have you used all of your personal allowance?
Everyone aged under 65 is allowed to earn £8,105 tax-free in the tax year to 5 April 2013. This rises to £10,500 if you’re aged 65 to 74, and £10,600 if you’re older.
Therefore, it makes sense to use your allowance wherever possible….and to use the allowance of family members. If you have a business and your spouse helps out, but doesn’t have any other income, it can make sense to pay them up to £8,105. This is also true for your children.
Similarly, if you have any other sources of income (eg savings, investments, or property rentals), you may be able to save tax by splitting the income with your spouse and/or children.
This will reduce your taxable income, with no tax to be paid by your spouse or child. Care should be taken over the details to ensure HMRC can’t challenge this – we can help you with this.
You should also consider splitting your income if you’re near any of the following income thresholds:
• £42,475 – if you breach this threshold, you will become a 40% tax payer. This also impacts on the rate of Capital Gains Tax you pay.
• £50,000 – you start to lose Child Benefits if you earn more than £50,000. There’ll be a detailed tip on this later in the week.
• £100,000 – if you earn more than £100,000, you start to lose your personal allowance. Your allowance is reduced by £1 for every £2 you earn over the £100,000 threshold – if you earn more than £116,210, you lose the full £8,105 personal allowance.
• £150,000 – if you breach this threshold, you become a 50% tax payer.
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