Tax return season is around the corner, which means a self-assessment tax bill is coming your way. No one wants to pay more tax than they need to, and with the cost of living crisis reaching boiling point this year, it’s important to save money where you can.

Luckily, there are a few things you can do to become more tax efficient. From maintaining accurate bookkeeping records to taking advantage of all available tax reliefs, you can maximise your income with expert advice and careful tax planning. Here’s how to lower your self-assessment tax bill.


Good bookkeeping

Meticulous bookkeeping plays an important role in keeping your tax liabilities to a minimum. The risk of miscalculating your tax bill falls significantly when your records are kept up to date, making you less likely to incur penalties or accidentally end up paying more tax than you owe.

Keeping digital records can help you maintain good bookkeeping practices – and with Making Tax Digital (MTD) for income tax coming in April 2024, it’s a good idea to get a headstart using MTD-compatible software.  The right software will not only make short work of recording all your day-to-day transactions, but also automate a lot of the time-consuming processes for you.

Accurately recording all your business costs will also make it easier to claim business expenses when you submit your return.


Tax planning

A bit of careful tax planning can make a big difference to your tax bill. You may be claiming some tax relief on your business expenses already, but making sure you’re taking full advantage of all your options can help you retain as much profit as possible.

If you are self-employed, there are a lot of different items you can claim as legitimate business expenses, this includes:

  • mileage costs
  • office equipment
  • staff salaries
  • accountant or solicitor fees
  • training courses and materials
  • rent and utilities.

While you won’t have to send proof of your business expenses when you file your return, you should still aim to keep accurate, up-to-date records of all of them. That way, you can show them to HMRC if required.

Making charitable donations can also give your finances a boost. Any donations you make to registered charities will be tax-free, and claiming the balance on your self-assessment return may grant you further relief.

In some cases, it may be more tax efficient to incorporate your business. Limited companies can access different tax reliefs and allowances than self-employed individuals, and it’s worth considering if you want to take home more of your profits.


Declaring pension contributions

If you earn over £50,270 in a tax year, you can declare your pension contributions in your self-assessment tax return. While most pension schemes will claim back the 20% basic rate of tax on your behalf and put it straight into your pension pot, earners that fall into the higher or additional tax brackets are entitled to an extra 20% or 25% of tax relief on top of that.

You can claim a tax refund on your pension contributions if you’ve paid too much tax. If you missed out on claiming tax relief on your contributions for previous years, you could still claim it this year. Doing this will lower your self-assessment tax bill and update your tax code, so you’ll pay less next time.


Considering your options

If you’re worried about being able to pay your personal tax bill in full, you should contact HMRC as soon as possible. You may be able to make a time to pay (TTP) arrangement so you can pay what you owe in regular instalments.

Missing a deadline can land you with penalties, so agreeing to a payment plan can help you avoid those additional costs.


Expert tax advisors

With so many ways to reduce your tax liabilities, submitting your self-assessment form can get complicated quickly. Check out our comprehensive personal tax planning services to find out how our eagle-eyed accountants can help bring your tax bill down while keeping you in line with rules and regulations.

Want to speak to an expert about increasing your tax efficiency? Our advisors can talk you through all your options, whenever you need.

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