Tax returns the key to tax savings
With the deadline for filing online tax returns fast approaching, including the correct information on a tax return and making the most of current legislation could be the key to big savings this tax year, according to pension and investments provider, NFU Mutual.
Sean McCann, personal finance specialist at the Mutual, gives a few words of advice to people looking to cut their tax bill: "Far too many people end up paying more tax than they need to because they don't make full use of the tax breaks available. Now is a great time to take action.
"Between now and the end of the tax year there are opportunities for people to get their finances in order and make the most of tax rules and legislation which could lead to some substantial savings. Acting now could transform personal finances and leave some people thousands of pounds better off.
Pensions - are you claiming your full tax relief?
Many higher rate and additional rate taxpayers are missing out on the full 40% or 50% tax relief on their personal pension because they don't include it on their tax returns.
If the taxman isn't notified of pension contributions, these taxpayers risk losing out by 20% or 30% as they only receive basic-rate tax relief of 20% automatically.
"Tax relief on pensions is an area where people can really maximise tax savings," said McCann.
"The good news is you can backdate your claim for tax relief on pension contributions made up to four years ago. So at a time when belts are tightening, this is a simple way to claw back the tax owed to you."
Could you give more away and foil the taxman?
Giving money away for inheritance tax purposes can be particularly tricky if you don't want the taxman to take a slice but some gifts can be made without paying any tax at all.
Everyone is entitled to give away a total of £3,000 each tax year completely free from inheritance tax. Any unused part of last year's entitlement can be carried forward too.
"It's possible to combine this year's and last year's entitlement to give away a more substantial sum," added McCann. "Anyone who hasn't given any money away since 6th April 2010 could make a tax-free gift of up to £6,000 by 5th April 2012. They could follow this up with a further gift of up to £3,000 once the 2012/2013 tax year starts on 6th April.
"This entitlement allows people to give away up to £9,000 over the next few months without a penny being paid in IHT. Married couples could double this figure by giving away £9,000 each."
Take advice before taking money out of an investment
Taking money out of an investment could have tax implications and that's why people need professional advice before they take action.
"Good advice is just as important when taking the money out of an investment as it is when putting the money in. The impact of Capital Gains Tax can be minimised if families - particularly married couples - use their individual tax entitlements effectively," McCann concluded.
"Families need to take a closer look at their finances to make sure they're making the most of tax opportunities and saving money during these tough economic conditions."