If you are looking for top tax-saving tips for 2021, you’re at the right place. Though it’s just the third month of the current year, however, our ultimate tips for tax-saving are going to save a lot of your money.
There are multiple ways you can save yourself from various taxes and can pay a minor amount. Whether you’re an employee, a businessman, a landlord, or a retired person, our tax-saving tips will help you to save thousands by following our tips. We’ve compiled a list of top tips to save you from various taxes.
Ready? Let’s start:
1.Income Tax and National Insurance:
An average personal allowance to be secure from income tax is £12,500. The amount can’t be carried forward to the next year, so it’s a good practice to check your threshold for the current year to utilise the allowance effectively.
2.Individual savings account (ISA) allowance:
For young adults around 18, the ISA allowance provided by the UK’s government is £20,000. It implies that you are exempted from the tax and can save a great amount if you are under the age of 18.
To build more wealth, you can divide your income stream into cash ISA and a stock and shares ISA. Both ways are helpful for making more wealth. But remember, any unused allowance won’t roll-over after 5th April 2021.
3. Capital Gains Tax:
Capital Gains Tax is applied on the profit received from investment assets or a business. This tax can be confusing for some people as it can sometimes be difficult to calculate the loss and profit correctly.
In a tax year, you can avail up to £12,300 for CGT, this implies that you are not liable to pay CGT within this amount. Unfortunately, this allowance can’t be carried forward to the next year, therefore, you are advised to use it wisely.
Luckily, you have enough time to utilise the remaining allowance in the coming months before the end of the tax year. Additionally, there’s another chance to minimize your tax through transferring assets to your spouse before your assets are sold.
For further assistance, you can also take expert advice from our accounting professionals.
For dividends, the tax is exempted up to £2,000 in a tax year. You have got a great opportunity to get the most out of this allowance.
You may receive dividends on your investment as an investor. Besides, if you own a limited company, you can pay the dividends to yourself.
5. Inheritance Tax (IHT):
The tax where you have to pay a lot is the inheritance tax. So while planning for IHT, you should use the gift allowance up to £3000 as it’s not going to be included in your estate value.
Moreover, you have the choice to carry any unused allowance from this tax year to next until 6 April 2022, as it will expire then.
The pension allowance during the current year can be 100% of your earnings up to £40,000 . It may drop if you have a high income and if you have taken the benefits previously.
You should remember that you have a lifetime pension allowance of £1,073,100 in 2020-21. You can utilise this pension amount for the next three tax years.
7. Spouses and civil partners:
You can easily save up to £250 if your partner is a non-taxpayer or pays a smaller amount of tax than you. As they can transfer up to 20% of their unused personal allowance to you.
Any assets can be used on your partner’s name with a lower tax band. It not only minimises your tax liability but you can be saved from CGT while transferring assets.
8. Research and Development Tax Relief:
While planning for your tax, you must be informed whether your business qualifies for this relief or not. As many business owners mistakenly believe that they are not eligible for this tax relief.
Consequently, they are unable to get the benefits out of it.
9. Corporation Tax:
Corporation tax is another important factor for tax planning. The rate of this tax is 19% and it will remain the same for next year. You should make sure to record it in the cash flow projections of your company.
We do hope that these top tax-saving tips for 2021 will be helpful for you. The tips we’ve compiled here are super easy to follow to save you from unwanted taxes.
If you are looking for expert help, get free consultation services from our professional accountants in London.