Controlling Tax and Benefits
You need to understand the basic tax and benefits rules to ensure you receive all the allowances, reliefs and benefits you are entitled to.
In this chapter, five things that really matter:
~ Attacking your income tax bill
~ Reducing National Insurance contributions
~ Benefiting from social security
~ Minimising capital gains tax
~ Avoiding inheritance tax
For employees, income tax (IT) is deducted from pay by the pay-as-you-earn (PAYE) system, which spreads the impact evenly over the year. The self-employed do not have this convenience.
Some people look upon National Insurance contributions (NICs) as contributions to a fund rather like pensions. This is wrong. There is no fund and there are no rights to future benefits. Consequently you should recognize.
* Are you aware of the social security benefits you may qualify for? If not, get hold of leaflets from your local office.
* Capital gains tax liability should also be looked at before the year end to see whether you can sensibly use your exempt amount.
* If you have a potential inheritance tax liability, think about taking steps to reduce it, or at least provide for it.
Another point to remember which is going off the point slightly is that if you do get a tax bill you can use your credit card to pay this or if you get a tax rebate you can use this to get rid of a big chunk of your credit card debt. These are both very good ideas that are worth considering.