When business owners hear the word TAXATION, they usually feel overwhelmed. It’s something that typically gets pushed to the back burner, and when tax time is around the corner, they scramble to get everything ready for their accountant.
It’s a surprise that many professionals and business owners forget that even a little tax planning can significantly minimise tax expenses and the risk of unbudgeted tax debt. While tax rules are complex and every business and family has a different tax situation, knowing how to do tax planning correctly helps you keep more of your hard-earned money. Here’s what you need to know:
How Tax Planning Can Help You Keep More of What You Earn
It Can Help You Lower Your Tax Rate
If you are aware of the various tax credits that can help you lower your tax rate, you can reduce your tax bill by thousands of pounds without even having to pay thousands more of tax. For example, there are tax credits that can help you pay less tax on your mortgage payments, employer-provided benefits, pension contributions, and job-related training.
You Can Reduce Your Taxable Income
Tax planning is like investing in your future bank account. If you know how you can reduce your taxable income, you can lower your tax bill and leave more money in your pocket at the end of the year. Some of the ways to reduce your taxable income are taking advantage of the capital gains tax allowance, raising your personal allowance, transferring unused personal allowances, and contributing to a pension plan.
You Can Find Ways to Make Tax Payment More Flexible
If you have an upcoming tax liability or have an outstanding tax debt, you might not be able to pay the whole amount on time. If you can find a way to make your tax payment more flexible, you can avoid penalties, future interest charges, and the risk of having your assets seized by the taxman.
You Can Find Legitimate Ways to Leverage Tax Credits
You may not be aware of the various tax credits that can go toward tax planning. However, there are tax credits that you can leverage for tax savings. Since the tax rules are always changing, you have to stay updated with the latest changes to make sure you don’t miss out on potential tax credits.
You Can Avoid Penalties and Interest Charges
There is no greater feeling of negligence than to receive a tax penalty bill or an interest charge bill from the government. If you pay your taxes late, you can receive a penalty of 3% for every month you are late. However, if you pay your taxes more than 30 days late, the penalty increases to 5%. If you don’t have the money to pay your tax bill on time, it is best to contact the tax office and ask how you can set up a payment plan.
Tax planning is a good way to use your money wisely and take control of your finances. When you plan ahead, you can pay less interest, get more allowances, and avoid penalties and interest charges. Tax planning is not as easy as it sounds, If you are not sure how to go about your tax planning, it’s better to get professional tax advice from a professional.
Fiander Tovell is where you can find some of the best Southampton accountants who can help you with your tax planning and other services. Contact us today to see how we can help.