Our latest new starter, Tim, joins Ridgefield Consulting as a Marketing Outreach Executive. He will oversee the company’s social media channels, as well as working to optimise the company’s other outbound channels. Take a look below to find out how Tim’s first month has been.
Having never previously worked in the accounting industry, Tim was soon put on a fast track course to learn as much as possible about the different types of tax and tax relief available. Here are the five tax tips that has shocked him most since joining that he never knew about before:
1. Self-employed people can claim £1,000 tax relief per year (known as the Trading Allowance) on their personal tax return where they don’t claim their exact expenses.
“From my own experience, starting a new business can be daunting and knowing how much tax you have to declare can be difficult. The trading allowance is useful for people starting to monetise a hobby with relatively low expenses and costs. When you come to declare your income for your self-assessment tax return the trading allowance means you can deduct a flat-rate of £1,000 instead of having to record all your expenses. For a lot of people who are just starting to monetise a hobby it may be financially beneficial to take the £1,000 allowance rather than adding up all the expenses to reduce income tax.”
2. The government add into your pension fund whenever you do
“Only having recently graduated from university, I have never thought too much about saving for a pension until I came across Ridgefield Consulting’s article on why pension funds are so tax efficient. I’ve since learnt that pensions are a great way to save for the future when you decide to retire and paying money into your pension offers several benefits. All pension contributions come out of your pre-tax earnings meaning you don’t pay income tax on your pension contributions. You will also receive tax relief from the government on your pension contributions meaning every time you pay in, they will too!”
3. Throwing staff parties can reduce a company’s tax return!
“An an employee, I only considered staff parties as a perk of the job. I never knew it actually helped reduce a company’s tax bill. However, now I know that hosting a staff party for employees, no matter if it’s for 1 person or 50 people, means a business can claim up to £150 per person as an allowable expense. Not only that, but it also doesn’t have to be declared as a benefit in kind on P11D forms. There are a few stipulations, all of which have been explained in the Christmas expenses guide article (but it doesn’t just have to be a Christmas party).”
4. You can save up to £20,000 tax-free by using ISAs, as well as earn additional benefits
“This I only learned as I was researching for one of my first articles for the website. If you’re serious about saving, then ISAs are a great option as they mean the interest on your savings is tax-free and some even offer addition benefits. For example, the Lifetime ISA allows you to pay in up to a maximum of £4,000 for the purpose of purchasing your first property or for retirement. When you do this the government will contribute 25% of that amount, meaning the maximum you could receive state-funded is £1,000. Other ISAs allow you to pay in up to £20,000 per year where all interest earned is tax-free. This can be more beneficial than regular savings account where the tax-free limit is up to £1,000. If you want to find out more, you can read my article on useful tax allowances.”
5. Inheritance tax planning is essential
“Before starting at Ridgefield Consulting, I had no idea how high inheritance tax was or what was taxable. When I started reading about it, I was shocked to learn that inheritance tax is charged at a flat rate of 40% on everything over the £325,000 nil-rate band, or a total of £500,000 where the estate includes the main residential property, and it also applies to gifts worth more than £3,000 if they’re given within 7 years of someone passing away. This shocked me, making me realise how important it is to plan what happens when the time comes if your estate is worth more than £325,000. Taking some professional advice could save your beneficiaries thousands in tax and is something that I will do in the future to make sure my family estate is optimised.”