Tax tips to cut your bill
Thursday, 24 May 2007 15:16
Bradford & Bingley has offered its top tips for paying less tax
In an effort to make Britons a little richer, Bradford & Bingley has offered its top tips for paying less tax.
Currently the average working adult in the UK works for 151 days simply to pay off their tax bill, but despite this people are still wasting money paying taxes they do not need to.
"It's disheartening to think that for nearly half of the year we are working simply to pay our tax bill, which is why it's so important that UK taxpayers make their hard-earned cash work for them," said Andrew Stead, head of wealth for Bradford & Bingley.
"If consumers are willing to spend a few spare hours getting their finances in order, rather than spending unnecessary money on the taxman, then they gain to reap substantial rewards in the long-term with a potentially smaller tax bill and greater financial peace of mind.
"We always recommend that anyone looking to review their financial situation should seek quality financial advice."
Top tax advice from Bradford & Bingley
ISA allowance – use it or lose it
Every adult in the UK is allowed to invest up to £7,000 in ISAs in each tax year, either as a total sum in a maxi ISA, or through a combination of £3,000 in a mini cash ISA and £4,000 in a mini stocks and shares ISA. As ISA allowances cannot be rolled over to the next tax year, savers must make sure to use it, not lose it.
Avoid inheritance tax
With property prices on the up, an increasing number of taxpayers own an estate, the value of which far exceeds the current IHT threshold of £300,000. Any value above this amount is taxed at 40 per cent. There is a lot you can do yourself to knock essential pounds off your tax bill such as making gifts to friends and family, leaving money to a charity and drawing up a will to specify how you would like your estate to be distributed. With the help of an expert you could make substantial savings as they can look at your financial situation as a whole and put together a plan for how you can really mitigate tax.
Take advantage of pension plan tax benefits
To encourage workers to save for retirement, the government gives tax relief on pension contributions, which can reduce your tax bill and increase your pension fund. Those with a personal pension will benefit from a basic rate of tax relief of 22 per cent on any contributions. In simple terms, for every £78 contributed, the government will pay £22, making a total contribution of £100. Those who are higher rate taxpayers are also eligible for a further 18 per cent which must be claimed back through a self-assessment form.
Make the most of your child's tax allowance
Many banks and building societies have special accounts for children that can be opened with just a few pounds. Fill out a special Inland Revenue form to ensure that your children do not pay tax on any accounts you open on their behalf. The child trust fund is also a tax-efficient savings account which benefits from government tax breaks.