As the saying goes, there are only two certainties in life – death and taxes. That may be true, but many people are paying even more than they need to in tax, because they haven’t had good tax advice. So, given it’s the new year and we imagine many people are looking to save money, we thought we’d share 3 tax saving tips with you which depending on your circumstances will hopefully save you a few pennies on your tax bill.
1. Take advantage of the Marriage Allowance
If you are married or in a civil partnership and one of you earns less than £11,000 whilst the other is a basic rate tax payer, then as a couple you should be able to save up to £220 in tax.
In order to do this the lower earner transfers part of their personal allowance (up to £1,100) to the higher earner, who then gets 20% tax relief on that portion of their earnings. So, if they transfer the full £1,100 the saving is £220.
Even better, if you were also eligible for Marriage Allowance in the 2015 to 2016 tax year, you can backdate your claim to 6 April 2015 and reduce the tax paid as a couple by up to £432.
You can apply via an online form or by calling the HMRC on 0300 200 3300.
Please note that it is the lower earner who must apply to transfer the allowance rather than the higher earner who will be receiving the benefit.
2. Ensure you use your £150 per person tax free social function ‘exemption’
If you didn’t have a Christmas party, it’s not too late to take advantage of the option to treat staff and/or guests to a good night out on the company.
To be exempt from tax, the party or similar social function must be all the following:
- £150 or less per head
- Annual, such as a Christmas party or summer barbecue
- Open to all your employees
It is also possible to hold more than one event as long as all employees are invited to both and the total spend per head of the events combined is under £150.
Even micro-businesses can take advantage
What many people don’t realise is that there are no rules about the size of the business involved and the exemption also covers members of your household attending as guests. Even if you are a one person company you can benefit – so why not celebrate a good year with a night out with your partner?
3. Arrange your life assurance through your company
If you run a Limited Company, the company can pay your life assurance premiums for you, by setting up ‘Relevant Life Assurance’. This does need to be done via a financial advisor to be tax efficient for your beneficiaries too, as it involves setting up a trust – which in the event of your death will pay out to them.
By organising Relevant Life Assurance through your company, this is tax efficient for you and the company:
- It is tax efficient for you as you will not be paying either dividend tax or income tax and national insurance on the premium (depending from which portion of your income you would otherwise have paid it).
- It is tax efficient for the company as it can claim tax relief on the amount of the premiums
We hope these tax tips give you some ideas how to ensure you keep more of your hard earned money over the coming year.
If you would like to discuss how any of them could benefit you, please give us a call here at Eden Chartered Accountants on 0117 977 4478.
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