Tax saving tips

Reduce your tax liability with these tax saving tips.

  • Keep accurate and timely books! If you don’t know how much you’ve spent and on what, you can’t claim for it!
  • Even if HMRC works out your tax for you, check their calculations. They get it wrong sometimes, if not often, ie about 500,000 times a year!
  • Check your previous years’ tax returns and make sure you have claimed all you can.
  • If you became self employed during the tax year or you are both employed and self employed make sure you haven’t paid too much in National Insurance Contributions. This is a common mistake so check thoroughly and claim back any over payments. Similarly you might have paid too much income tax so check that too. See Self employed NIC’s for more detail.
  • Inform HMRC if your income reduces substantially or you expect it to during the tax year. You should be able to apply for a reduction of your payments on account. But be careful not to reduce these by too much as you’ll end up paying interest on the difference.
  • Send your tax payments by the deadlines to avoid the automatic penalties and any interest payments: before the deadlines but not too much before, to help with cash flow. See Self assessment deadlines for more detail.
  • Most savings have tax deducted at source so apply for a refund if you haven’t used up all your allowances/marginal rates.
  • Keep receipts for everything that you buy for your business eg even the bus ticket you used to go into town to buy stationery – file under Motor/travel expenses!
  • If your turnover was less than the VAT threshold, currently £85,000 (2018-19), when you started using your car for business, you can use HMRC’s approved mileage rates for motor expenses. This simplifies record keeping and will save you tax if your motor expenses are actually less ie if you have a fuel efficient car. However you will need to record dates, journey details and mileage for all business trips. You can find the approved mileage rates on HMRC’s website Travel – mileage and fuel allowances including those for motor cycles and even bicycles! So those of you, like me, who don’t own a car needn’t loose out. See also GOV.UK: Simplified expenses if you’re self-employed.
    Download my approved mileage calculator Excel worksheet.
  • If you use something in both your business and personally, you can claim as an expense or capital allowance, the business proportion of its cost eg claim for use of home or car etc.
  • Make sure you use any losses you make to your advantage by offsetting them against other income etc. See Your loss or HMRC’s?
  • Get the most out of your Annual Investment Allowance (AIA) by distributing your capital expenditure over multiple tax years to fully exploit the 100% First Year Allowance (FYA) available in each.
  • Startups can claim capital allowances on equipment they already own that is used by the business eg a car. Put the value of these items under capital introduced in your cashbook. You can then claim yearly Writing Down Allowances (WDA’s) for these.
    See also Can I claim for expenses etc incurred prior to trading?
  • Separate business & personal finances! Again, if you don’t know how much you’ve spent and on what, you can’t claim for it.
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