Self Assessment

1. Importance of Tax Planning While the term “tax planning” is frequently used, it is not necessarily well understood. Here’s what you need to know.

2. Tax planning means deferring and flat out avoiding taxes by taking advantage of beneficial tax-law provisions, increasing and accelerating tax deductions and tax credits, and generally making maximum use of all applicable breaks available under our beloved Internal Revenue Code. What tax planning really means Tax planning is the art of arranging your affairs in ways that postpone or avoid taxes. By employing effective tax planning strategies, you can have more money to save and invest or more money to spend. Or both. Your choice.

3. How are tax planning and financial planning connected? Financial planning is the art of implementing strategies that help you reach your financial goals, be they short-term or long-term. That sounds pretty simple. However, if the actual execution was simple, there would be a lot more rich folks.

4. Tax planning and financial planning are closely linked, because taxes are such a large expense item as you go through life. If you become really successful, taxes will probably be your single biggest expense over the long haul.

5. Types of Tax Planning There are a few different types of tax planning that are useful for individual people, companies and organisations. Some of the tax plans include; short term tax plans, long term tax plans, permissive tax plans and purposive tax plans. The short term planning allows you to reduce taxes at the end of the income year. Long term plans allow you to plan at the end of the beginning or end of the year,

6. When you start tax planning, you can find many guides online and you can also speak to financial advisors and solicitors to help get you started and give you all the important information that you will need to know. For example, each person has an inheritance tax allowance up to £325,000 with anything over the threshold being charged at 40%. So, if an estate was valued at £400,000, only £75,000 of that would be taxed. Since the majority of people won’t leave an estate over this amount, most feel they don’t need to know about inheritance tax. However, actively considering it and your future can help you to avoid any nasty surprises later on. How It Works

7. Helpful for Businesses There are different types of taxes which can be hard to keep up with especially if you own a business. Tax planning is important for both small and large businesses because it can help them to achieve their business goals. When you have a tax plan as the owner of a business, you can lower the amount of taxable income, gain more control of when taxes are paid and also reduce the rate of tax. Depending on the type of business you have, you can find many different benefits.

8. Short-range Planning. It means that planning thought of and executed at the end of the income year to reduce taxable income in a legal way. Suppose, at the end of the year, an assessee finds his taxes have been too high in comparison with last year and he tends to reduce it. Now, he may do that, to a great extent by making proper arrangements to get the maximum tax rebate. It does not involve a long-term commitment, yet results in substantial savings in tax. Long-range Planning. A planning that chalked out at the beginning of the income year to be followed by the year. This planning will not pay off immediately, but likely to help in the long run. Permissive tax Planning. This is a planning of taking advantage of different incentives and tax deductions, planning for availing different tax concessions. Purposive Tax Planning. It means making plans with a specific purpose to ensure availability of maximum benefits to the assessee through correct selection of investments, making a suitable programme for replacement of assets, varying residential status and diversifying business activities and income. Methods of Tax Planning

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