Are your clients minimising their tax liability?

28 Jun 2021

For the majority of taxpayers, the tax system is as mystifying as it is unavoidable. As many taxes are deducted at source, contact with HMRC is minimal, which is how most people like it. However, this means that opportunities to make business, personal income or savings as tax-efficient as possible are frequently allowed to pass by.

Then there are the millions who must file a self assessment return each year and have direct contact with HMRC. For many of these, the process is an annual chore to be completed as quickly and painlessly as possible.

Tax as an opportunity

All this adds up to a major opportunity for those accountants who can de-mystify parts of the fiscal system for their clients. This is true whether those clients have a family; run their own business; are an employee; are a saver or an investor; own property; are disposing of assets; or arranging to pass on their estate after death.

If you are able to identify planning opportunities, highlight pitfalls to avoid and signpost areas where action can be taken, your clients will be able to make significant tax savings.

How super is the super-deduction?

One recent example of the tax system not always being as straightforward as it first appears was the introduction of the capital allowances super-deduction. The much-publicised super-deduction provided allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances.

However, questions around what assets qualified, how suitable the super-deduction was for some types of investments and the timing of its use all soon arose. Businesses often rely on the expertise of their accountants to help guide them through making these key decisions.

Business decisions

However, the super-deduction is just one example because those who run their own businesses will be faced with a plethora of important decisions that they have to make from day one onwards. Preparation is key to business success and accountants have the knowledge and experience to help businesses take the right options.

Your expertise could be crucial to a new start up as it makes its first business plan or tries to find the best source of finance. Decisions ranging from selecting the most appropriate business structure to choosing an accounting date all have tax implications.

Once a business is off the ground it will need help with timing its expenditure, dealing with PAYE and VAT compliance, as well as navigating the Making Tax Digital initiative.

A family affair

Do your clients know that if spouses equalise, as far as possible, their income they can potentially shave thousands of pounds from their tax bills? Accountants can help their clients to utilise the full range of allowances, including the savings and dividend allowances to minimise any higher/additional rates of tax.

Other clients may not be aware that they are missing out on £2,000 per child a year to put towards the costs of childcare under the Tax-Free Childcare (TFC) scheme.

Employee benefits

Some of your clients will be working for others and they may not be making the most of the benefits available to them as an employee.

As contributions by an employer to a registered pension scheme are generally free of tax and national insurance contributions (NICs) for most employees, this is often the best perk an employee can get. They may want to sacrifice some of their 'normal' salary to maximise this benefit but may need your expertise to make sure any salary sacrifice scheme is effective.

The car fuel benefit charge can be expensive. It may be cheaper for the employee to pay for all the fuel and to reclaim from the employer the cost of business miles driven in a company car based on a specific log of business journeys undertaken.

Similarly, mileage claims do not always offer the best value. If an employee is paid less than the statutory rates to use their own car for business purposes, then they can claim a top-up deduction from HMRC.

From pensions to motoring, medical insurance to tax-free loans, there are many areas where employees could be missing out on the benefits available to them.

Looking to the future

Many of your clients will already be planning for their future.

They will be saving into pension schemes or looking for tax-efficient investments. Additionally, some may be part of the buy-to-let property boom or a first-time buyer saving for a deposit.

Other clients will be further along life's journey and looking to make the most of selling business or property assets, fund retirements and plan to pass on their wealth to future generations.

Whatever they are planning, they will need to know what options are available to them, what reliefs are available and what the limits are to their plans.

Tax Strategies

In this blog, we have covered just some of the helpful tax hints and easy-to-read explanations in our Tax Strategies guide.

This informative guide outlines the taxes your clients are likely to encounter in their business and personal lives. Personalised for your practice, it includes practical tips and straight forward advice using terms your clients will understand.

Find out more about Tax Strategies here.

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