Top 5 Mistakes You Must Avoid in Your 2021 Tax Planning
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Any person’s financial objective should include tax planning. Tax planning begins when an individual starts to work and lasts almost the rest of one’s life, even after retirement.
Paying taxes is an important part of contributing to the nation’s growth, but when the government offers you the opportunity to save money on taxes, you should take advantage of it.
We’ve noticed that people often fail to look at tax planning critically and begin making tax-saving investments in a very technical manner.
Tax planning is an important aspect of our financial planning process, and careful planning will go a long way toward achieving our financial objectives. In this blog post, we’ll go through Five common mistakes to avoid when it comes to tax planning.
1. Paying taxes when not needed
A Personal Savings Allowance of £1,000 is available to all basic rate taxpayers. This ensures that the initial £1,000 of the interest from an individual’s joint savings interest is tax-free. The PSA for higher rate band taxpayers is £500 (nil for additional rate taxpayers).
Unlike in the past, building societies as well as banks will no longer deduct tax at the source (unless or until R85is signed). If an in dividual exceeds their PSA, he/she will be required to pay taxes to HMRC directly.
2. Not performing as a group
Married couples/civil partners can save money on taxes by gifting some kind of investments to their spouse whosoever pays the minimum or lower tax rate – but it must be a true gift, not just a symbolic gesture.
If you’re married or in a civil partnership and you were born on or before April 6, 1935, you might be eligible for Married Couple’s Allowance, which will help you save money on your taxes.
If you were both born after April 6, 1935, you canbe eligible for theallowance but it depends totally on your earned income.
3. Refusing to demand the Blind Person’s Allowance
If you are born blind or highly sight-impaired, or if you live in Scotland or Northern Ireland and your vision is too poor to do any job that requires eyesight, you can receive an additional £2,390 allowance.
After you’ve registered with the local authority as a blind person, call HMRC and inquire for Blind Person’s Allowance. It is not applied automatically.
4. Not paying attention to tax code
A tax code indicates your employer the amount of your tax-free pay; the rest is taxed. The tax authorities will notify you on a regular basis to clarify about the creation of code.
Check that you’ve been given the right kind of allowances, pensions or other type of incomes shown are accurate, and that everything you don’t understand has been clarified.
5. Not paying on time
As a taxpayer you need to complete tax-filing for the current year so, you must complete it by October 31st, or by January 31st if you complete it electronically. Each tax year, the tax should be payable by the 31st of January.
If an individual miss or exceeds the deadline, you’ll be hit with a £100 penalty right away, with higher fines coming in another three months.
Key advantages of tax planning
Tax planning techniques are often used to assist a company in achieving its financial and business objectives. Tax planning has advantages for both large and small companies, and it plays a significant role in:
• The smooth running of the financial planning process is facilitated by tax planning.
• Collection of taxes on time decreases legal wrangling.
• Tax planning allows taxable profits to be channelled into a variety of investment plans.
• Taking advantage of all available tax reliefs, grants and credits
• You will save money by managing your taxes.
• Corporate tax planning allows them to contribute to our country’s economic development.
• Helps to maintain economic stability
Winding up
Nowadays, taxes for companies, firms, and the self-employed individuals are a little more difficult because they can’t be deducted on a pay-as-you-earn basis like they are for employees. This is where a tax accountant’s services become extremely valuable.
A tax accountant who is professionally licenced and trained will assist you in organising your financial statements and calculating your tax bill so that you always pay the correct amount of tax.
Tax advisors will also assist you in developing and implementing a tax policy that will help you avoid paying excessive taxes in the future.
You shouldn’t underestimate the value of having a tax accountant on your side, whether you run a big organization or are a self-employed sole trader.
Sophia is a full-time financial writer at experlu. she is a passionate blogger and love to share her knowledge on various subject. Content created by Experlu– are loved, shared & can be found all over the internet on high authority platforms.
