This blog will look in detail into what is meant by the term tax planning, whilst also giving you examples and best practises.
Definition of tax planning
In short, tax planning is the method of analysing your personal financial situation from a tax perspective. Tax planning plays a key part in your overall financial plan as it gives you the ability to ensure you are being as tax efficient as possible.
Why is planning important?
Tax planning is very important, as it can help to reduce tax liability and maximise eligibility to contribute to retirement plans, which are both crucial.
When done correctly, income tax planning can significantly reduce the amount of tax that you have to pay. By setting out a plan for your income tax, this will enable you to take advantage of any opportunities that may arise that can minimise your tax bill. In addition to this, personal tax planning can also highlight other options such as capital gains tax and inheritance tax.
Important note #1 – Tax planning should play an integral role in the broader look at your overall business taxes.
Earnings and income tax planning
Effective income tax planning can offer you ways to save in two different areas.
As an employee of a business, you may be offered various employee benefits, which may include tax advantages. When it comes to tax planning, you should assess what the value of such benefits have and the effect they have on overall tax.
Important note #2 – Income tax planning is very important when it comes to company cars as this can involve a significant tax charge.
However, what is just as important is carefully considering both the value and consequences that tax relief has on pension contributions, no matter whether these contributions are made by your employer, yourself or both of you.
Important note #3
