Tax planning is many times confused with tax preparation, with only thought given to planning when preparing their annual tax return. However, little can be done to actually reduce your tax bill at that point. If your aim is to reduce taxes, you need to be aware of tax planning opportunities throughout the year. If you are resident in Uk then you can also get the best income tax service through various online sources.
Take time in the early part of the year, maybe during tax preparation process, to assess your tax situation, and look for ways to lower your tax bill. Consider a list of items, such as what kinds of debt you owe, which investments you own and need to dispose, how you are saving for retirement and kids education expenses and what tax-deductible expenses you incur.
Also deciding whether you want to file separately or jointly, timing the sale of your capital assets, deciding on period of withdrawal of retirement funds, the timing and amounts of giving gifts and when to pay expenses are some examples of tax planning.
By thinking about tax consequences during the year on every big financial moves will prevent you from finding out later that there was a better way to handle every transaction.
Here are few examples of tax planning which might help you either to get better refunds or avoid shelling out on taxes during the filing time.
If you are an employee, you can avoid paying at the end of the year by increasing your tax withholding. It actually changes the mind set from "how much need to pay" to "how much I will get back as refund". But the problem is, more money will be taken out of your paycheck throughout the year and you need adjust your budget accordingly.
That may sound like a good strategy but at the same time you don't want to give away Uncle Sam interest free money by withholding too much. A nice realm check is to use this year's return and keep the all deductions constant and see whether you withholding is right level. If you got too much refund reduce the withholding proportionately, on the other hand if you paid tax, increase your withholding accordingly.