We would all love to save on our tax bill. For one thing, no one likes forking out twenty per cent of their wage even if it is the law. But, more importantly, the money we spend on taxes is our largest outgoing. If we could cut that, we cut save ourselves a fortune. How do you do it without ending up in a jail cell? Just follow these simple tricks.
Top up your Pension
The amount you pay into your pension is taken from your yearly earnings, and that figure is then taxed. What’s the result? You pay far less tax than you would do without paying into your pension. For example, say you earn $40,000 a year and pay 20% in tax, you will pay around $6,000. But, if you pay $1,000 into your pension and then get taxed on $39,000, you will only pay $5,712 in tax and save around $300.
$300 a year is a lot of money that you could spend on a holiday. So, instead of paying tax, spend two weeks of the winter in sunnier climates.
Put your Money where your Partner is
If you are in a long term relationship it is time to make the big commitment and share your money. If one of you pays a higher rate of tax, but the other pays a lower rate, you can move money into the account of the lower rate of tax payer. So, as an example, instead of paying 40 cents for every dollar, you would only pay 20 cents. However, the amount you actually save all depends on the rate of tax of course.
If you are self-employed or you take care of your tax, you can claim legitimate expenses that will make your tax bill smaller at the end of the year. Don’t be afraid to take full advantage of claiming expenses and put in for any that you think are relevant. Of course, you can’t go overboard, but if you have serious claims all the authorities will do is ask for extra information or reject them. If you don’t ask you will never get.
Do a bit of research and figure out what expenses come under the umbrella that is your profession. So, if you are a journalist who works from home, for example, you can claim for your laptop, the Wi-Fi and any travel expenses to meet potential clients.
Take on the Tax Man
The best way to save on your tax bill is to get the money back from the government. Yes, you are perfectly liable to claim tax back if you have overspent during the tax year. The government won’t tell you, so you’ll need to be proactive and figure a few things out for yourself. For example, how much tax have you paid? How much have you earned in the year? What is the income threshold?
If you fall below the threshold, you won’t have to pay any at all and if you have overpaid they will have to give you your money back.
Hopefully, these tips will go a long way to saving you a lot of cash in the future.