Tax Help Section

How To Reduce Your Tax Bill & Save Money

January 2006

The old saying of 'a penny saved is a penny earned' is wrong! A penny saved is actually more than a penny earned because tax always has to be paid on earnings. Therefore a penny saved is far more valuable and saving money is one of the best ways to boost your income.

Here are some quick and easy ways to make sure that your tax bill is the lowest it can be -

Check Your Tax Code

• If you've got the wrong tax code then chances are you're paying over the odds
• Check your tax code using the HM Revenue & Customs website

R85 Forms

• Are you a non tax-payer? If so then these forms notify the Inland Revenue of the fact
• This means that interest on savings will be paid tax-free creating savings of around £50 a year

Isas

• Isas are tax-free accounts
• Money can be invested in both cash and equities
• £3000 per year in cash, £3000 in equities and £1000 in insurance, profits and interest are tax-free!
• If you have savings and/or investments then you MUST shelter this in Isas to save some good money

Stamp Duty On Houses

• If you're buying a house you can save a lot of money if you either buy a house just below the relevant stamp duty threshold
• Or do a deal with the seller at just below one of the limits
• Currently 1% is paid on houses between £60k-£250k, 3% on £250k to 500k and 4% on £500k+

Tax Allowances

• If you're married and/or have children you can save a lot of tax being paid by transferring assets between family members
• Remember assets don't have to fixed like property, they can be shares etc

Inheritance Tax

• 40% is paid to the taxman on anything above £275k
• IHT is a complicated matter these days as the government likes to change the rules as it pleases
• It's therefore critical if you are worth a lot of money £500k+ to take some serious financial advice, this can save you and your beneficiaries thousands of pounds in the future

Charity

• If you give to charity then make sure these are tax-efficient because it's a win-win situation, not only do you pay less but the charity gets more!
• See this article on charity tax for more information

Pensions

• Make sure you also get some good advice on your pension, this is an area where tax-breaks are generous
• This area is now even more important to check because that the pension rules and regulations will have all changed after 6th April 2006

Summary

Nobody really likes paying tax but it's a fact of life. The trick is to make sure that you pay as little as possible and this can only be achieved by doing some work, either yourself or with the help of financial advisors. And we admit it's not a topic that most people enjoy but the results can and often do put some real extra money in your pocket therefore making the whole process financially worthwhile.

See Also

• Find's list of tax help websites