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Managing tax efficiency in a downturn

Managing your tax obligation efficiently and more!

In the current economic downturn, many businesses and individuals are looking for ways to cut their costs. This doesn’t only mean cutting expenditure, but it also means that both businesses and individuals should seriously look at their annual tax bill, to see if any monies can be saved.

Many do not realise that there is money to be saved with active tax planning and professional tax advice. Whether you are paying tax as an individual or as a business, it is important to seek professional advice on how you can lower your tax bill.

For individuals, simple solutions like making a tax-deductible charitable contribution or changes to your mortgage, or investigating whether a company car is more attractive from a tax perspective than owning your own car can make all the difference. For businesses, there are even more ways to save on taxes and some can be quite complex.

Business owners and CFOs are under pressure to cut costs. One of the major expenditures for a business is taxes, and there are ways for businesses to leverage their taxes. However, the UK tax authority, or HMRC, is getting tough on tax evaders so it does not pay to think of illegal ways to save money as there are plenty of legal ways to lower your taxes.

A tax professional or accountant can give you advice on the latest tax laws and codes that may affect your business. For both businesses and individuals, planning ahead is important. Together with a tax professional or financial planner, plan your income and possible taxes a few years in advance.

Plan ahead

Whether it is buying or selling a home, getting an inheritance, selling off assets or staff redundancies, all these instances will affect your tax status. A tax professional will help you plan ahead and advise you on which actions to take and when to minimise your tax bill. There are also plenty of tax incentives that come into play, which should be leveraged to the maximum on an annual basis.

For businesses, there are also issues regarding pension payments, redundancies, VAT payments, group restructuring, leases and asset sales, all of which can seriously affect a company’s annual tax bill. Many accounting firms and tax professionals are now specialising in long-term tax strategies, compliance and risk management. Business owners should utilise these new services to try to lower their tax bill.

Investments and savings

Tax efficiency also is important when looking at investments and savings. In this downturn, people want to maximise the money they are investing and minimise the amount of taxes they are paying on their returns. For simple savings, the UK government gives plenty of incentives and there is no reason for people to not take advantage of these inducements. For example, one simple tool is an Individual Savings Account (ISA).

Free professional tax advice

For those that are unable to afford a financial advisor, there are also plenty of ways to get free professional advice. In the UK, there are numerous charities and government agencies that provide free tax advice. For example, TaxAid (taxaid.org.uk) or AdviceGuide (www.adviceguide.org.uk) specialise in providing free tax guidance and help to both individuals and business owners.