There are only three things in life which are certain; birth, death and taxes. Every year around £9.3 billion is wasted on taxes because people haven’t done tax planning to reduce their tax burden.
Tax planning is considered the most effective way to comply with the tax laws and to organise and minimise their taxation liabilities. Some consider tax planning to be the effective way of working a dodge, or the legal way of tax evasion. This couldn’t be further from the truth. Many people who are tax evading claim they have a right to because everyone else is doing it, but tax planning and tax evading are two very different things. The tax law give some choices, so judgement is always involved when it comes to declaring taxes. As long as the tax payer is complying with the spirit of the tax law, then there is little to no issue. But you should always be sure about what you are doing with your taxes, there is a line between what it legal and illegal, it’s important that you don’t push that line too far.
So by identifying what you will have to pay, and coming up with strategies to minimise the amount you will have to pay, you are effectively planning for your taxes.
How can tax planning help?
Essentially, tax planning is getting ready for the taxes ahead. By doing this you are preparing yourself or your business for what is to come. If you know you are going to have to pay a large amount at tax time, then by planning for it early you can change things to offset the payout, or set aside money so you aren’t under pressure to find it at tax time.
There are many things you can plan for. This such as inheritance and wills are usually well thought out when it comes to taxes. This is generally done by a solicitor.
Who is tax planning for?
Tax planning is for everyone, regardless of whether or not you own a business. It’s an invaluable tool which can save you thousands every year. There are many tax experts who will be able to find the best ways for you to plan ahead.
What can I do to minimise my taxes?
If you own your own small business there are many things you can do to prepare yourself for the next tax period. The first thing you should do is find out exactly what you are paying for every year. There are of course some taxes that you won’t be able to get out of, but it is always good business practice to be aware of where your money is going.
Planning annual tax planning sessions will help as well, especially if you bring someone in who can help you. For example, a tax expert, a solicitor or even a bookkeeper. Employing a bookkeeper on a regular basis should keep your business on track in regards to taxes, just stay in the loop.