Device converter



Classified ads

Put an ad on this website

Recently added

articles > Law events

Pay Less Tax

10 Tips to Pay Less Tax

By Shabir Djakiodine

Even though you would like to, it is too late to rewrite history on your 2012 taxes, what is gone is gone. However, the good news is, you still have some time to save on your 2013 tax bill. Shabir Djakiodine, a Chartered Accountant from Euro Accounting  Ltd, gives you 10 tips to make smarter tax decisions.

1. Capital allowances

If you buy an asset for use in your business, you cannot deduct your expenditure on that asset from your trading profits. Instead, you may be able to claim a capital allowance for that expenditure.

Equipment that you own and use for your business

Tools, machinery, office equipment, computers, vehicles, pieces of plant and factory equipment may qualify for plant and machinery allowances. The annual investment allowance gives a 100% deduction against profits up to the amount of the allowance. Ensuring that the annual investment allowance is claimed on all new items of plant and machinery can save considerable amounts of tax. You can deduct up to £250,000 from 01/01/13 ie if you decide to renew all your computers of your office and buy equipment for £200,000, the whole amount will be an allowable expense that you can deduct the same year it incurred.

2. Putting family on the payroll

If a member of your family has no income, you could employ them in your business or take them into partnership, and save a significant amount of tax for the family as a whole. Care must be taken to ensure that the arrangement is commercial and the level of pay is commensurate with the duties performed to avoid an attack from HMRC. The National Minimum Wage rules also need to be considered, although the National Minimum Wage does not apply to directors.

3. Keeping the Full Personal Allowance

The basic personal allowance is reduced where a person has `net adjusted income’ in excess of £100,000. The personal allowance -£9,440 - is reduced by £1 for every £2 by which this limit is exceeded until the allowance is fully abated. This means that anyone with income of more than £116,210 loses all their personal allowance.

By redistributing income to a lower income spouse or civil partner, for example by putting investments in the spouse’s or civil partner’s name only, so as to reduce income below £100,000 the allowance can be preserved.

4. ISAs (Individual Savings Accounts)

ISAs are tax favoured savings and investment accounts. You can use them to save cash, or invest in stocks and shares. The maximum you can put in to an ISA is £11,520 in the tax year 2013-14, up to £5,760 of which can be saved in cash. You don't pay any tax on the interest or dividends you receive from an ISA and any profits from investments are free of Capital Gains Tax. But this does mean that you can't use losses on ISA investments to reduce Capital Gains Tax on profits from investments outside the ISA.

Junior ISAs

Junior ISAs are new long-term tax favoured savings accounts especially for children. They are available to any child under 18, living in the UK, who does not have a Child Trust Fund (CTF) account. Like ISAs, you can use them to save cash or invest in stocks and shares. You can save up to £3,720 in the tax year 2013-14 into a Junior ISA and you won't pay any tax on the interest or dividends.

Tax-free interest on bank and building society accounts

Banks and building societies usually take tax off interest at the rate of 20 per cent before they pay it to you. But if your taxable income is less than your tax allowances you can register to have your interest paid 'gross' (without tax taken off). If you're under 16, your parent or guardian will have to register for you. You can also claim back tax you've paid on your savings when you didn't need to.

5. Getting tax-free interest on savings or claiming tax back

If you're on a low income and have savings with a bank or building society you could be paying tax on your interest when you don't need to. If this is the case, you can register to have the interest paid tax-free. You can also claim a refund of any tax you've overpaid.

Who can get tax-free savings interest?

If your total taxable income is less than your tax-free Personal Allowance then you can:

  • register to get savings interest paid tax-free
  • claim back any tax you've paid

Taxable income includes money you earn from a job. But it excludes money you get from certain benefits and some other sources.

6. Utilising Your Annual CGT Exemption

Capital Gains Tax is a tax on the profit or gain you make when you sell or ‘dispose of’ an asset. You usually dispose of an asset when you cease to own it. It's the gain you make - not the amount of money you receive for the asset - that's taxed.

The annual tax-free allowance

You have an annual tax-free allowance for Capital Gains Tax known as the 'Annual Exempt Amount'. The Annual Exempt Amount for the tax years 2013-14 is £10,900 for each individual. If your overall gains for the tax year are above the Annual Exempt Amount, you’ll pay Capital Gains Tax on the excess. If your overall gains are below the Annual Exempt Amount, you won’t pay Capital Gains Tax. Any disposals within this figure are exempt from capital gains tax. This means that you can use your tax-free allowance each year by selling off just enough shares (or other qualifying assets) to realise a gain equivalent to the annual exemption.

7. Claim Your Pre-Trading Expenditure

You can claim expenses incurred in the seven years before commencement of trading against your first year’s trading profits. The expenses are treated as having been occurred on the first day of trading. The same rules apply to determine whether a pretrading expense is deductible as apply normally for determining deductibility of expenses.

8. Tax relief for business mileage in your own vehicle

You may be able to get tax relief for business mileage if you use your own vehicle for work. It can be a car, van, motorcycle or cycle.


First 10,000 business miles in the tax year 

Cars and vans


Motor cycles




Passenger payments - cars and vans

5p per passenger per business mile for carrying fellow employees in a car or van on journeys which are also work journeys for them. Only payments specifically for carrying passengers count and there is no relief if you receive less than 5p or nothing at all.


9. Setting your salary and dividends

The most efficient mix for directors is to get an annual salary of £7,696 and dividends of £32,010 without paying any income tax. This gives you a total income of £39,706 tax free.


10. Are you self-employed? Consider setting up a Limited Company

Have you ever wondered why so many people toy with the idea of setting up a Limited Company?

Advantages of a Limited Company

  • A separate legal entity from its owners
  • Liability of the company owners limited to the value of the shares For example any tax due is the responsibility of the Limited Company and not of the individual. The same applies for other debts.
  • No National Insurance due on the payment of dividends hence more tax efficient.
  • A more attractive corporate identity (especially to banks and clients)
  • More suitable if individuals needs to be employed by the business

Dividends do not attract National Insurance contributions so by incorporating you will save Class 4 National Insurance contributions. National Insurance contributions Class 4 rate is 9%.


For further information, please contact:

Euro Accounting Ltd

Phone : +44 (0)778 986 2405

            +44 (0)845 680 5168


Comments are moderated. They are displayed after an administrator validation.


You can reload the captcha by clicking on it