Let’s discuss tax planning as a savings plan for you as a taxpayer not on PAYE.
You can be a business person or a consultant in the service industry.
If you’re wondering how to navigate the TAX maze without feeling overwhelmed by the end-of-year payable that is sure to come knocking every other year, then take the next few minutes and read through this article.
The main takeaway is to understand what tax planning is all about and how, when applied effectively is your best tool to ensure you’re compliant and not breaking your bank every end of year.
Simply put, tax planning is ensuring that your financial affairs are synced with your tax obligation in the most efficient manner possible.
The starting point of this journey is knowing what tax obligations you are liable to, when these obligations fall due, what supporting documents you need to have, which tax credits apply to you and then how you can settle the tax liability in the most efficient/ least overwhelming way to you.
With the above understanding, let me narrow the area of focus to the one tax that is about to fall due and that is on everyone’s mind and thought, i.e the 2024 annual statutory tax, whose deadline is by 30th June 2025. And even before we start, can we all first agree that this filing falls due on 1st January of every year, the six months to June are the time allowed by the government to allow us to get our houses in order, otherwise anytime from 1st January you should ensure that you are getting ready to file your previous year’s tax and settle whatever amount is outstanding and enjoy your financial journey without the govt headache.
I’m sure you are waiting for the part where tax planning can be used as a savings platform, and without any further wait, let’s see how.
This is very easy and applicable, once you know your tax obligations, e.g income tax, and or VAT, the next step is calculate how much is your future liability, right now we can take 2025 as a year one of starting this journey, so how we plan is use the 2024 income tax liability and project what 2025 liability will look like, then either choose to pay instalment tax or advance tax based on that amount and split in the various applicable intervals, with instalment tax its guided that it applies within the 4 quarters of the year.
With the above you have taken care of two headaches and saved yourself from unnecessary headaches, you have saved yourself from having a huge burden falling due all at once when the liability is due, and you have saved from the false illusion that you have liquidity hence utilizing it now only to be in trouble when the liability falls due.
Remember I mentioned you need to know how to utilise whatever tax credits you have, yes, that’s another saving because these credits help reduce the tax payable from the income generated.
CHECKS & BALANCES
Failure to plan your taxes and you have income is doing the ostrich way of burying your head in the sand and hoping that the regulator doesn’t catch up with you, the truth is all you are doing postponing the inevitable, no actually what you are doing is digging a deeper hole, because the regulator knocks they does so with additional fees in the name of penalties and interest for failure to comply, so do yourself a favour and get your financial planning started and the best place to start is by getting a qualified personnel to guard you through the process,
Remember, as I always say in KE’s Law, ignorance is no defence, and if I may add, it may cost you more, so before you file a NIL return, make sure you understand what that means when the tides hit the sea.
Oooh, Happy New Year