Where investors should go to get tax advice online
The news, when it came a few months ago, wasn't unexpected but it was still something of a shock: as a nation, we pay out more in benefits than we raise in income tax. According to the think tank Policy Exchange, in 2009/10 the Treasury is expecting to take in £140.5 billion in gross income tax receipts while social security benefits are projected to be £164.7 billion.
So if you want to keep more of your money, the best way to do so is through tax planning, and the easiest way to accomplish it is online. Below, Martin Fagan reveals where investors should go to get tax advice online, covering income tax, road tax, council tax, capital gains tax (CGT), stamp duty or inheritance tax (IHT).
Complex PAYE coding
With a government looking to increase income tax to meet its benefits bill, planning to give the government less of your earnings in the first place is a good place to start. If you're on PAYE then you're at the mercy of the payroll department of the company you work for and the government, and the only thing you can juggle in your favour is your tax code.
According to recent research undertaken on behalf of the Chartered Institute Of Taxation (CIOT), 47 per cent of UK taxpayers polled said they never checked to see if their PAYE code is correct. 42 per cent said they found it 'very' or 'fairly' difficult to understand whether they are paying the right amount of tax. Worryingly, a National Audit Office report from December 2006 indicated that HM Revenue & Customs (HMRC) estimated that UK taxpayers might have overpaid around £500 million via PAYE. So don't assume the tax code HMRC has given you is the correct one.
A solid, all-purpose website is www.digita.com/taxcentral. Digita is a supplier of practice software to the accountancy profession, so it uses its website as a shop window to market its products. However, it has a lot of free stuff that is very useful, not least its tax calculators, such as its payslip checker, tax code checker, rebate estimator and student loan calculator, as well as calculators for pension tax relief, annuities, IHT and even company car benefit, to see how much having a company car will affect your salary. If you're looking for a one-stop shop for online tax guidance, this site is hard to beat.
For the self employed
For those in self-employment the need to fill out a self-assessment form can be a daunting prospect, especially if they receive income from investments and/or pensions and are still employed in some capacity. Alas, there's also a dearth of free information about filling one out (most websites are touting for the chance to sell you accounting services or a book).
The best free site is SmallBusiness.co.uk, a portal for smaller companies. This gives you access to a number of guides such as tips on how to fill out the form and things you can claim as expenses against income. And if you run your own business, there are guides to PAYE, VAT and business tax reliefs.
Expert tax tips
Many websites allow people to air their views or ask for advice on a range of topics. For tax queries, TaxationWeb and SmallBusiness.co.uk have a tax tips forum, providing a free service where users can add questions or comments to the site on tax problems or tax matters in general. Accountants, tax advisers and other experts offer practical help and advice in a free and open forum.
Advice for financial traders
If you're an active trader in shares, have a large and varied portfolio and find filling in the annual capital gains SA108 form a nightmare, help is at your fingertips thanks to www.timetotrade.eu. Now, we should state from the off that only the basic service is free and you have to register to use the free services, but it remains a useful resource for investors.
Many investors will be thinking they don't need to submit a tax return as they lost money during the market collapse. However, if they report these losses to HMRC they can then be carried forward indefinitely to offset against the gains they will hopefully make at some point in the future. To take advantage of this, investors need to input all historical shares, funds or forex transactions and timetotrade.eu works out the rest, including complex calculations for: section 104 holdings, equalisation payments, notional distributions, share reorganisations (such as mergers, rights issues and takeovers) and share identification rules.
Although this is part of the free service, it will only give you a number – the amount of your total capital gain or loss, but this isn't sufficient to please the HMRC. These days, investors are required to print off their fully completed CGT return form SA108 (or form 185 for investment clubs) ready to submit, along with the supporting calculations now required by the HMRC, and this facility is only available to subscribers, at £199 for a year or £19.99 a month.
Mitigating IHT liabilities
One tax that kicks in after your demise is also a tax you can best plan to mitigate while you're still alive. Investments aside, and even in a choppy property market, anyone with a three-bedroom house in the UK is in danger of busting the inheritance tax barrier of £325,000.
Calculating your IHT liability is difficult, not least because (terminal illnesses aside) you don't know how long you have left to live. But when you make or update a will, you need to know the approximate value of your estate.
A good IHT calculator is provided by Skipton Financial Services. This walks you through your assets and calculates any potential IHT liability, so it's a good idea to know the value of your property, investments, cash deposits, insurance polices and other assets, as well as debts such as loans. Fill in the boxes and the calculator will tell you how much IHT your estate will have to pay.
Engaging a tax professional online
This brings us to the final issue regarding online tax services. If your tax affairs are hideously complex and you have a substantial amount of money to shield from the chancellor's grasp then, rather than doing it yourself, it's worth engaging the help of a tax professional, either an accountant or a specialist IFA. The internet can help you here as well. For an IFA, www.unbiased.co.uk is run by IFA Promotion Ltd, the body responsible for promoting independent financial advice in the UK.
David Elms, chief executive of Unbiased.co.uk,says, 'While tax can seem a complex issue, especially in the current environment, people can save hundreds of much needed pounds by ensuring they are being tax efficient and not wasting money.'
He concludes, 'Taxpayer resentment towards compulsory taxes can be offset to an extent by people being as tax efficient as possible in other areas of their finances. While many may feel nervous about making the wrong financial decisions at the moment, an independent financial adviser can assess your entire financial position and ensure you are being as tax efficient as possible.'