- Contribute to Retirement Account / Pension Scheme
Making a deductible contribution will help you lower your tax bill this year.
If you put away £5,000 a year for 20 years in an investment with an average annual 8 percent return, your £100,000 in contributions will grow to £247,000. The same investment in a taxable account would grow to only about £194,000
The amount you save for making a contribution will vary and above is only an example. Over time, pension contributions will save you money, depending on your contribution, income tax bracket, and the number of years you keep the money invested.
- Be on Time and Organised
Being organised doesn’t lower your tax bill but it means you won’t be fined for late submissions.
If you don’t know how much you have to pay and haven’t saved for it, you could be caught having to pay late and in instalments which can mean you incur fines and/or interest.
It also adds to your financial stress in other areas, if you have to rob Peter to pay Paul – someone or something is not getting paid! Including not being able to pay yourself!
Having a cash flow projection and putting money away for your tax each month can save you stress and unnecessary fines in the long run.
- Keep Note
Make sure you are keeping receipts so you can claim for all expenses, pay items through the business account e.g. your train or bus ticket, get your mobile phone invoiced and paid through the business, purchase your office computer through the business etc.
The important part of this, is keeping track. Keep receipts, invoices etc. Putting these on a spread sheet or excel can work but an online system like receipt bank and Xero can cut out hassle and wasted time.
4. Give it away
Make a donation to charity.
Remember though, only actual contributions are deductible; therefore, if you pledged an amount during the year, only the amount that you actually contributed during the year is usually counted for that year. The cash contributions to charities must be supported by a dated bank record or receipt so make sure to get proof!
Above are just some of the ways you can save money on your tax bill – accountants aren’t all about how much you have to pay, we very often are trying to save you money where we can.
If your tax bill was too high last year……………………talk to us. Click here