With the end of the tax year looming, many business owners are in a mad panic to ensure that they have squeezed every last drop out of their various tax allowances, and we don’t blame them! However, rather than making tax-saving a last-minute mad rush, take your time and plan ahead. Here are our top five tips to help your money go further in 2020.
1- Maximise Your Personal Allowance
This is the most obvious way, and it’s also the easiest. As you may already know, you can earn £12,500 each year without paying tax on it. What you may not know, is that if you claim under the Marriage Allowance, your partner can transfer up to £1,250 of their unused allowance to you. It may not sound like a lot, but you could actually save around £250 each year.
2- Tax Relief On Charitable Donations
Charities claim the standard 20% tax relief on your behalf, but if you are a higher-rate taxpayer, you will be able to claim back the difference on what you have paid (40%), and what this charity claimed (20%). This tax relief claim needs to be done through your Self Assessment tax return.
3- Utilise Your Pension Allowance
For this current tax year, the Pensions Annual Allowance allows you to claim relief on contributions up to £40,000. Tax relief is paid at the highest rate of income tax that you pay. You can still claim 20% tax relief on your contributions, even if you aren’t paying income tax at the minute. This is an efficient way to save money for your future, but it does depend on your current situation. We would always advise that you get expert advice on making the most of your pension allowance.
4- Tax Efficient Investments
If you are looking to maximise on your investments, a scheme like Venture Capital Trusts and the EnterpriseInvestment Scheme are both worthy considerations. They offer tax relief at around 30-50%, but each scheme will have its own rules and limits. If you prefer more straight forward ways of saving, you can achieve your goals by opening up an ISA.
5- Inheritance Tax
Inheritance tax can be a stressful topic, with many not agreeing with it at all. It is worth knowing that parents are allowed to give their children up to £3,000 every year without paying tax on it. If you have never used the exemption, you will be able to give away up to £6,000 at one time, but this is only a one-time allowance.
If being tax-efficient seems too complicated, or if you need an accountant to get you on the right track, get in touch and find out how we can help you make the most of your money in 2020.