So we’ve heard a lot on the news in the last few days about the super rich exploiting loopholes to pay as little tax as possible, and frequently I hear people say that there are no tax breaks available for ordinary folk. And while you can’t save millions if you don’t have millions there are certainly a few ways that you can reduce your tax bill.
Tax Code – Is It right and can you claim any allowances to adjust it.
Your tax code if you didn’t already know is a number letter combination that HMRC issue to you and your employer that shows at what point you should start having taxes deducted from your earnings. There are some allowances that you can claim that will raise the point at which you are taxed.
- If for example you work from home you can claim a tax code increase of £312 per year (£6 per week) to help cover the cost of heating, light, water, phone and internet.
- Do you provide your own tools for work? if so you can apply for relief on the cost of buying and maintaining them.
- Do you wear a uniform or specialist work clothes? There could be some relief for that too.
- Use your own vehicle for work…even a bicycle? – There could be relief for that too.
- Pay membership fees to a professional body? You could also get relief on these.
- Travel or overnight stays? Also something you can claim for.
- Bought a computer or other work from home equipment your employer only partly re-imbursed – you can claim the difference
If your employer has covered the above in full then your ability to claim will be limited but it’s actually pretty easy to claim just click here to go to HMRC’s website and start the ball rolling.
Marriage Allowance
If you’re married or in a civil partnership and one of you either has no earnings or low earning then you can transfer part of your personal allowance to your spouse.
This very simple thing could save up to £252 this tax year. Full details on HMRC’s Website.
Married Couple’s Allowance.
If you or your spouse was born before 6th April 1935 you may be entitled to Married Couple Allowance, which is worth up to £941 per year. And contrary to popular belief it doesn’t matter if one of you is in a residential care home. Full details on HMRC website.
Use Your Pension
Any money that you pay in to your pension whether it be via your employer or via your bank account is either never taxed or has the tax refunded. Hopefully you’ll live long enough that you’ll retire and with increasing life expectancy you could have to live a long time on the money you built up while working, a pension is incredibly tax efficient so use it. And ask your employer if they’ll consider using Salary exchange and passing along the National Insurance savings to your pension and you’ll save even more.
Oh yeah and don’t forget pensions are also exempt from inheritance tax, so if that’s a concern to you then make sure you consider your pension.
Child Care
Do you pay for Child Care? If you answered yes then there is a government scheme that allows you to get a 25% boost from the government of up to £2000 per year, increasing to £4000 if your child is disabled. Full details as always at HMRC and here is the link.
Use your ISA allowance.
If you have any savings or investments and you’re not using your ISA allowance you’re missing out it doesn’t cost you anything and you can usually still access the same types of investment/savings but the money designated to your ISA allowance grows free of both income and capital gains tax.
Top tip if you have both Investments and Savings, it’s usually best to use the allowance for your investments. The allowance this year is £20,000.
Consider splitting your assets with your partner.
Most tax allowances are attributed to an individual. This is certainly true of dividend allowance, capital gains tax and savings income allowance. So it makes sense that if you are likely to incur a bill for any of those that will exceed the allowance you move some of the assets in to your spouse’s name so that you can use their allowance too. Transfers between spouses are usually expemt, but if you have a tax issue and you’re not sure you fully understand it speak to a professional before taking action.
Stop paying National Insurance.
OK not everyone can do this, but if you’re over state pension age and your employer is still deducting NI from your pay they shouldn’t be, so make sure you tell them. I’ve seen this many many times usually becuase the employer has your date of birth recorded incorrectly.
Claim relief on charitable donations.
You know when your mate is doing the race for life and you pop on Just Giving and sponsor them a tenner, you tick the Gift Aid box and the charity actually gets £12.50 as they get back your basic rate tax…well it seems not many people realise this but if you als declare that tenner on your tax return and you’re a higher rate tax payer you’ll get a reduction in your tax bill to take account of the higher rate tax you pay too. And if as someone said to me they don’t want to ‘profit off charity’ just donate a bit more than you would have in the first place knowing you can claim it back.
I hope at least one of these tips was helpful to you!