Tax season is eminent and excitement rises amongst all United Kingdom citizens, but amidst that haze of giddiness, lies one of confusion. Taxes are not a black and white type of process and many resort to knowledgeable accountants in order to avoid errors. However, there are ways to learn to do your taxes appropriately and legally.
We will show you five legit ways to pay less income tax.
Accurate property value assessment
Your property tax is determined solely by the value it was given by a local tax collector. The higher your property is valued at, the more you are due to pay. If you suspect that your house is overvalued, it is crucial to seek another assessor or an updated assessment for accuracy.
You can save big money if you decrease your property tax. This is a simple but overlooked method of paying less income tax. It is estimated that 30% of homeowners have an over calculated property value and if you were to add up all the potential savings you could have had with a simple assessment, you will be surprised at the total.
Decode your tax code
HMRC acquires your tax code by deducting the value of your benefits from your personal allowance, which varies accordingly. It is essential that you fully understand your tax code in order to verify that you are being placed in the correct category and paying only what is fair, but also, receiving the legal benefits that pertain to your category.
A certain letter will be assigned to signify the type of taxpayer you are. You can easily obtain coding information online or with a local professional that handles taxes for further help in decoding your tax code.
Buy a house or take college courses
If you are looking to buy a house, you might be happy to read those mortgage interest payments are tax deductible. You also get to deduct the amount you pay each year for property tax as an added bonus.
Your monthly mortgage payments are almost entirely interesting so you can look forward to a considerable tax deduction for a while to come. Buying a house has never looked so good.
Education
Education is one of the leading tax deductibles out there. In case you were on the line about continuing your education, this might be the push you needed. Applying for college courses or any postgraduate degree can help lower your income tax greatly.
Having unpaid student loans will also help since interest from these types of loans is also tax deductible. You should always pay your student loans though since interest is hefty and can accumulate at an alarming rate. Seek professional financial advice if needed before starting any educational goals to see just how much you can potentially save and via which ways.
Use a 529 Plan
Those lucky few who can save for retirement and also for their children’s college funds at the same time should consider contributing to a 529 plan. A 529 will allow you to save for your child’s college fees with no federal income tax charges. This means that while that college savings fund is adding up as your child grows, you will be clear of paying the 15% capital gains taxes.
Your child will be able to withdraw any funds in the account tax-free as long as the money is going towards education. Education fees can include room and board, tuition, book payments and anything pertaining to university debt. It is a win-win for both parent and child and should be considered as a go-to plan for those that are financially able to do so.
Contribute to a 401k or traditional IRA
Your tax due amount is based on the adjusted gross income; the higher it is, the more you owe. Luckily, the adjusted gross income can be lowered significantly by contributing to a 401k or traditional IRA retirement account. This method will also allow you to bypass the capital gains percentage cost.
Conclusion
Tax season does not have to be a headache or a source of anxiety. Go through the list of ways to pay less income tax and look up even more methods, but be careful to only investigate legal ways of doing so. An expert accountant can set you on the right path if you are stuck and consultation is usually free or at low cost. Or learn more about UK tax rebates on useful websites.
Paying less income tax requires you to be organized, smart and intuitive. Start on the path of financial freedom and learn to be wise when it comes to taxes so you can reap the most benefits.
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