The Top Six Ways To Pay Less Tax Today!

The avoidance of taxes is the only intellectual pursuit that still carries any reward. We have to all pay tax but some of us are paying too much and that's because we don't know about the the gaps. There are ways of reducing your tax burden and it's probably best to speak to a qualified financial advisor but here are some of our ideas for a happier and tax free 2011.

1. If you think you're going to die, get ready for it (p.s. unfortunately we all die)An odd one to start with but basically if you die then your loved ones could be burdened with probate cost and Inheritance Tax. Get professional financial advice to ensure your loved ones get what they deserve. Basically if you die and you leave more than £325,000, inheritance tax is payable on any amount above this at a current rate of 40%. A will also makes sure the people you want to benefit, actually do benefit.

2. Take advantage of a tax free savings account (ISA): Individual Savings Accounts, or ISAs, are a fantastic way of saving money that is not tax-deductable. If you are a regular saver and hold a standard savings account, it may be worth considering an ISA as you will currently be taxed on your savings. For the tax year of 2010/11, an ISA allows you to save up to £5,100 annually, although this is increasing to £5,340 for the 2011/12 tax year.

3. Using your car for business but your fuel allowance doesn't cover all the costs? It may well be that you could be eligible to claim tax relief if the payments you receive falls below HMRC guidelines. As with all tax relief schemes there are lots of variables to take into account so the HMRC website should be your starting point. Definitely worth a look if you are doing lots of business mileage.

The amount you can claim on depend on the type of vehicle you use, the mileage you do and the amount of compensation you currently receive from your employment for the mileage you do. Mileage rates for vehicles are shown on the HMRC website. Multiply this by the mileage you cover for your job (not including to and from your place of work and home) minus the amount of compensation you already received and what is left is the amount you can claim on. As with all these thing there are numerous variables to take into account so before you jump for joy you will need to check with HMRC against your own personal set of circumstances.

4. Fully use your capital gains tax (CGT) allowance: Do you own any assets, shares for example? Capital gains tax is the tax charged on the profits made by such assets. So for example, say you bought 20,000 shares in 1990 priced at £1 each but sold each of them in 2011 for £6, you would have an accumulated a hefty profit.

However, there are ways to mitigate the amount of Capital Gains Tax that you pay. Everyone has an annual Capital Gains Tax 'nil rate band' - an allowance under which you do not pay CGT. The allowance is £10,100 (in tax year 2010/11) meaning that you can sell some assets each year and any profits up to this amount will incur no tax. Many people sell small amounts of assets every year up to the CGT limit in order to reduce the amount of CGT that they pay.

5. Be philanthropic, give to charity: If you make regular donations to charity, then you could benefit from the gift aid scheme. Through this scheme, charities can take your donations from money that has already had tax deducted. Then you are able to reclaim the basic rate tax back from HMRC on the gross amount. This is only applicable however if you are a basic rate tax payer.

Higher rate taxpayers can claim back the difference between the higher rates and the basic rate of tax on the total value of the money donated to the registered charity.

6. Claim your tax expenses on property that you let: If you are a landlord and rent a property, you should make sure that you claim all the appropriate tax expenses for the letting. A standard residential letting is considered a property business and, as such, there are several expenses that you can claim. The most common are: interest on property loans, repairs and maintenance to the accommodation, lettings agent's fees, Council Tax or other utility bills that you pay, property insurance and the costs of maintenance or upkeep (gardening, cleaning etc). Make sure you reduce your tax liability by claiming all the appropriate tax expenses.

So it is possible to pay less tax. When we say less tax we mean the right mount of tax, because obviously paying less tax than you should could drop you in a spot of bother, and we wouldn't want that!

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