A Few Shortcuts to Save You from the Tax Burden

How to get ahead and have an allowance

15:39 27 March 2013

You may be thinking that you will have that personal allowance to back you up, no matter how much you earn. If you make less than £100,000 you are probably right. However, if you make even a pound over this amount your personal allowance starts decreasing which means a heavier tax burden.

 

Plan now to prepare your tax returns. The HM Revenue rates let you use your personal allowance only until you reach the £100,000 limit. Once you earn that much money they start reducing your allowance at a rate of 1per cent to 2per cent.

 

This means that they take out £1 for every £2 you earn over the allowance. This will make your allowance unavailable once you reach £116,210 for individuals. 

 

There are a few ways to combat this situation and reduce your tax burden:

 

• You can take a salary sacrifice from the job that pays you the most. This is usually the main job or first position.  

 

• You can ask your employer for more benefits instead of more income.  These benefits can include a company car, gym membership, childcare voucher etc. 

 

• Check with your boss or human resources department first to see if this is possible.  This may not be beneficial if you actually need the money instead of benefits, if you do not have children, or do not want any of those extra company benefits.

 

Are you self-employed and want assistance while working a second position?

 

• You could hire your spouse and pay them a salary or wage.

 

• The wage must be justified by the level of work they complete for you.

 

• You could also put some money into dividends from your business instead of taking it out as cash.

 

• Another piece of advice is to get additional ISA or pension fund money up until the amount you earned.

 

Thus, planned personal tax returns could save you from incurring extra tax burden which could take money that would be of much greater use to you and your family.