Find out how to cut your tax bill without the effort of complex tax planning.
Find out how to cut your tax bill without the effort of complex tax planning.
There are plenty of ways you can cut the amount of tax you pay. Here are five of the most simple.
Cash ISAs
First of all, have you remembered to use this year’s ISA allowance? You can now save up to £5,100 in a cash ISA each tax year, and pay absolutely no tax on the interest you earn. Even though rates are low today, you should fill up your ISA as much as you can. That way when interest rates improve, you’ll be able to take advantage of a much better tax-free return on more of your cash.
Save with NS&I
You can save £15,000 in a three year index-linked savings certificate from National Savings & Investments. You can also put away another £15,000 in the five year version. These certificates pay a return which is equivalent to 1% above the retail prices index, and are completely tax-free. But if you need to access your money early, you can do so for a relatively small interest penalty.
Top up your pension
Your pension contributions will automatically qualify for 20% tax relief, which means you’ll only have to pay £80 out of your own pocket for £100 to be invested in your pension plan. If you’re a higher rate tax payer, you’ll be able claim a further 20% tax relief through your annual tax return which will effectively reduce your tax bill for the year.
Check your tax code
Your tax code will determine how much tax will be deducted from your salary. Surprisingly, incorrect coding notices are regularly sent out by the taxman, so it’s really important you check yours is accurate. You can find out what your code should be on the HM Revenue & Customs website. If you find you’ve paid more tax than you need to, make sure you apply for a refund.
Use your partner’s personal allowance
Finally, if your partner is a non taxpayer, but you aren’t, consider transferring income-generating assets - such as savings and investments - into their name to make full use of their personal allowance. The personal allowance is the amount income you can earn before you start to pay tax. If your partner is under 65, they can earn £6,475 before any tax has to be paid.