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Take Advantage Of These Tax Loopholes While You Still Have The Chance

Nobody wants a large tax bill, and if there is a way that you can reduce the amount that you pay, you’re going to do it. You’ve probably heard of all sorts of different ways that people manage to reduce, or even get rid of their tax bill entirely. If somebody tells you that they aren’t paying any tax at all and they aren’t breaking any laws, they’re probably lying. However, there are plenty of ways to pay a lot less than you currently are, without breaking any laws whatsoever. These techniques aren’t a quick fix that works for everybody, and they’re all dependent on your own personal situation. So, don’t expect to wave a magic wand and save yourself thousands every year. As long as your expectations are realistic, you should be able to cut your bill down drastically.

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There is a lot of debate about whether it is morally acceptable for people to cut their tax bills, as some people don’t have the capability to do it while others do. The government has said that they are committed to closing some of the legal loopholes so you might not have that long left to take advantage of them. It isn’t clear whether they will follow through with their plans or not, but just to be on the safe side, you should get going soon if you want to cut your tax bill. These are the methods for reducing your tax bill that are perfectly legal, for now.

Check Your Tax Code

This isn’t quite a loophole, but it could reduce your tax bill significantly. The HMRC aren’t always the most efficient organization and they have been known to make big mistakes in the past. One of those mistakes is putting people on the wrong tax code. If it goes unnoticed, you could be paying way more than you should be every single year. It’s worth checking that you’ve been paying the right amount because you could be eligible for a reduction, as well as a back payment on anything that you’ve overpaid.  

Offshore Accounts

Whenever people hear about reducing tax bills, they usually think of offshore accounts. Most people tend to misunderstand how they work and they think that anybody can just move their money offshore and then stop paying any tax. It isn’t quite as simple as that, unfortunately. For most people, there are little to no tax benefits to going offshore because you have to declare your worldwide earnings. However, for people that are paying the higher tax brackets, there might be an advantage. They are very complicated so you should seek legal advice to find out whether you can benefit from an offshore account or not. But, you’ll have to be quick because plans to close that loophole are in motion already. The government is asking people to declare if they have any offshore tax affairs in what they are calling a  Worldwide Disclosure Facility. In a few years, they are likely to be closing that loophole and everybody that has declared their offshore accounts may have to bring their money back home and lose those benefits for good. If you get in now, you might still get a year or two out of it before the laws are changed.

Tax Relief For Married Couples

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The tax laws for people that are married or in a civil partnership are different to single people and you can get some relief on your bill. You are eligible for a reduction if one of you is paying a lower rate of tax than the other, but you need to arrange your finances properly. Any assets that you are paying tax on, should be transferred into the name of the partner who pays the least amount. That means that any dividends you’re paying will be charged at the lower rate. It all adds up and it could save you thousands. That’s why it’s better to consider your tax affairs as a family, not as two individuals.

Joint Ownership

Any assets that bring in a significant income are subject to capital gains tax. The tax-free allowance is currently at around £10,000. However, the tax laws state that if something is under joint ownership, then you can combine your allowances. That means you get double the amount of tax-free allowance, which could save you a significant amount on your tax bill every year. You do need to be careful though, the amount you’ve earned from your assets will be added to your income. This could push you over the limit into a higher tax bracket and actually increase your bill so it might be beneficial for one of you to take sole ownership of the assets instead. The best thing to do is work out what your total tax bill for both of you will be and then decide what is best for your personal situation.

Allowances

If you’re self-employed, claiming allowances and expenses when you put your tax return in is the easiest way to cut your tax bill by a huge amount. When you’re running a business from home, you can claim all sorts of things that don’t usually come under expenses. All of the running costs of the house are technically running costs of a business premises so all of your heating and electricity bills, council tax, repairs, and even the interest on your mortgage are all tax deductible. However, as soon as you start claiming allowances like this, your property becomes liable for capital gains tax as soon as you sell it. You need to decide whether you plan on selling anytime soon and whether the savings will outweigh the extra capital gains tax that you’ll need to pay.

At the moment, all of these things are perfectly legal ways of reducing your tax bill. Some people may say that it is immoral to avoid tax in these ways but regardless of that, you aren’t breaking the law. Having said that, we don’t know how long these loopholes will be in place for, so if you want to take advantage of them, don’t wait until it’s too late.