Most of us have just finished getting over the stress received from our Christmas expenses. Now, it is the taxman is tugging at your coat tails and you feel another financial hangover in the horizon.
These great tax tips for 2007 will help keep that hard-earned money in your pocket.
1. File your tax returns on time to avoid penalties for being late.
2. If you are a trade’s person you may be able to write off certain expenses relating to your trade. Make sure that your records are always up to date and that any connotations are in place.
3. Keep all records for a minimum of 6 years before destroying.
4. If you are self-employed then you must keep complete books that comply with HMRC. If you are unsure of acceptable book keeping practices check with the HMRC.
5. Don’t believe everything people tell you. You will hear all kinds of stories about what expenses you can deduct. Make sure you have it right. For an expense to be deductible, it must be wholly incurred exclusively for the purpose of your business.
HMRC has issues a booklet called “Janet and John” which explains what records they would expect a self-employed individual to keep. It is excellent.
6. Plan so that you have the cash ready for the taxes you are going to need to pay. That way you will not be stalling sending in your taxes and having to pay interest.
7. If you are self-employed and work from home, you can write off a room of your home if you use it to conduct business. That also means you can deduct a portion of your lighting, heating, and mortgage interest.
8. Never write off a portion of your mortgage payment for space used because this could lead to you having to pay capital gains on your principal residence when you sell it.
9. Understand what deductions are available and whether they apply to you.
10. Any time you are able to split income consider if it is advantageous to you.
11. Pay less in inheritance tax on your death. Make use of the $3000 annual exemption or the gifts out of income exemption, which lets you make regular gifts to people out of your regular earnings as long as you do not short yourself.
12. Pay less in capital gains tax. There are some interesting ways you can reduce your capital gains. These are too lengthy and detailed to list here, but your financial advisor or tax consultant.
13. New residents do not rely on the old 90-day rule as there have been some complex changes to this and you need to calculate it correctly.
14. Share some seasonal goodwill if you are in a 40% taxpayer bracket. You can give to charities this time of year when it is so much in need after the Christmas season and reap the benefits on your taxes.
These tax tips for 2007 will help keep the taxman at bay keeping the most dollars in your pocket and giving you time to recoup your finances.