Income taxes represent a substantial expense for workers in the UK. Even those who qualify for the basic rate tax still pay 20 percent of their eligible earnings to the government in the form of income taxes. For workers and business owners who earn high wages, the tax rate can be as high as 50 percent. Although there are few legitimate ways to avoid income taxes altogether, simple strategies can help ensure that your tax payments do not exceed your legal obligations. Taking advantage of these strategies can help ensure that you keep as much of your earnings as possible to take care of everyday expenses and enjoy discretionary purchases.
Get in touch with a tax adviser. If you attempt to complete and submit your tax forms on your own, you can easily become confused by the complexity of determining your own tax liability. Because tax regulations change almost every year, you could spend hours trying to determine which deductions you qualify for. You might even miss out on new opportunities to save money on your income taxes simple because you are not aware of the most recent changes and new regulations.
A professional tax adviser can help ensure that you pay only what you are required to pay. These professionals are dedicated to understanding the latest tax law changes and can use their knowledge to help you find deductions and other tax-saving opportunities. Although you might be hesitant to pay an adviser to handle your taxes for you, the tax savings you could realize can more than pay for the cost of working with a qualified adviser.
Make sure you file your taxes on time. Most workers in the UK know that they have to submit tax forms in a timely manner each year; however, a variety of circumstances cause many workers to delay their filings. Unfortunately, missing the tax filing deadline can be a costly proposition - if you do not file your tax return by the due date, you may incur a fine of £100. If your filing is still outstanding six months after the due date, you can expect to incur additional fines and penalties.
Claim all eligible business expenses. If you are self-employed or even have a part-time business in addition to your job, you can claim a variety of expenses to reduce your taxes. The deductions you claim reduce your business profits, which are the amounts upon which your tax liabilities are based.
If you use part of your home for your business, you can deduct a portion of the costs of running your home. The amount you can deduct is proportionate to the percentage of your home you use for business purposes. The home deduction applies to amounts you pay for rent or mortgage, as well as to your costs for electricity, gas, and other utilities. Keep in mind, though, that if you use part of your home for both personal and business use, you must reduce your deduction by the percentage of time you use the space for personal purposes.
You can also deduct the cost of using your automobile for your business; however, you cannot deduct the cost of purchasing the vehicle. Keep detailed records of your trips to determine the mileage rate you can deduct. You are not permitted to deduct operating expenses you incur when using the vehicle for personal use.
Don't forget about the costs of purchasing and storing inventory for your business. If you have to use part of your home to store inventory, you can claim this part of your home under a business use deduction. Also, you might be able to deduct the costs of equipment necessary to run your business, such as computers, phones, printers, and general office supplies.
Losses from a part-time business can even offset tax liabilities from regular employment earnings. When you factor in the deductible costs of running your business, you might find that the business operated at a loss. Suppose that activities for your business resulted in a net loss of £1,000. If your employment earnings resulted in a tax liability of £1,000, the business loss would cancel out your taxable employment gain. As a result of this cancellation, you would not owe any income taxes for that year.
Sam Jones the author of this article wanted some more info about basic rate tax and the tax bands, he found the comparison website uSwitch.com provided a lot of helpful advice on this matter.
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