Top things to know about tax planning

Why do I need to plan?

The UK tax system is complex, but structuring your finances efficiently to use the allowances available can ensure that you pay the minimum amount necessary. Tax planning is always legitimate when it occurs within the boundaries of UK tax law.

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There have been some criticisms of tax planning as harmful, but this is incorrect. The tax saved can always be spent carefully in areas that stimulate the economy, not necessarily for conspicuous spending by individuals. In fact, the act of filing returns promptly, paying due tax in advance and deducting required tax at source, all assist in compliance.

What taxes and allowances should I be looking at?

Don’t assume that only direct taxes are eligible. Also consider sales tax and customs and excise duties.

The allowances you should be seeking to maximise include Income Tax, Capital Gains Tax, charitable giving, Dividend Income, investment schemes, Digital Tax – such as Airbnb income – and ISA/pensions/savings contributions. The amount of many basic reliefs and allowances has risen in recent years and new legal avenues regularly appear.

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When should I plan and what other factors should I take into account?

Always do your planning before the income accrues or you risk fraud, as this constitutes diversion of income. If you need help with your accounts in Swindon Chippendale and Clark can assist in choosing the right time to plan. Time is relevant because it fixes the year of accrual, and place fixes your residential status. Also consider the taxable entity and the status by which the income is assessed, i.e. individual or company.

Will tax planning affect the rate of tax?

Possibly yes, as you disperse tax across separate entities, the rate can alter.

How can you distinguish between dispersal and diversion of income?

Income accrues separately when it is dispersed. Diversion occurs when money is funneled to other entities after initially accruing in one entity. Consider seeking advice from one of the market leading accountants Swindon has to offer individuals who are looking to responsibly and efficiently manage their tax affairs.

What about the method of filing taxes?

The method of accounting is important because you ascertain income for tax purposes on the basis of the usual principles governing commercial accounting. This is then subject to adjustments only as required in relation to the statute.

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