15 Tips for Saving Tax

Print version

1. Check Your Tax Code Each Year. Each year, get all of your payslips together and check if the tax code which you have been assigned is the right one that you should have. You may find that you have been paying more tax than you should have! If you need additional information regarding what your tax codes are or what they mean, then go ahead and check out our tax calculator and you'll be given the opportunity to find out the tax you should really be paying.

2. Your Dividend Allowances. As of the 6^th of April in 2016, in regards to dividends the initial £5,000 that you gain from your investments will be completely tax free. From that point on, if you are a basic tax rate payer then you will pay 7.5% on your earnings. On the other hand, if you are a higher tax rate payer then you will pay 32.5% on your earnings. Additional tax rate payers will pay 38.1% on their earnings.

3. Your CGT Allowance. For the tax year of 2016/2017, your capital gains of up to £11,100 are considered as tax free. Applicably, those who have joint assets are able to claim for double that allowance of up to £22,200. As of the 6^th of April, 2016, capital gains tax will be taken at a 10% rate (unless it is in regard to property gains in which case it will be taken at an 18% rate), and will be taken at a 20% rate for those who pay higher rates (unless it is in regard to property gains in which case it will be taken at a 28% rate).

4. You Don't Pay CGT on ISA Shares. That's right, you do not pay CGT when it comes to selling your shares that are within an ISA.

5. Childcare Schemes and Tax Credits. If you are not self-employed and you have an employer, talk to your employer about whether or not a childcare scheme is currently in place. A 'Salary Sacrifice Childcare Scheme' is very easy to establish and can not only save employees money, but can save employers money too. Furthermore, if you are eligible for child tax credits you are able to save even more money.

6. Your AIA (Annual Investment Allowance). If you're either a business owner or a landlord, you will have the ability to claim capital expenditure on item purchases that are necessary for your work to continue. This includes things like work tools and technology. In the year 2015, business owners were able to claim up to £500,000 in AIA, although since January of 2016 that number dropped to £200,000.

7. Self-Employment Cash-Flow Boost. If you've registered as self-employed then there is a possibility that you will be able to increase your cash-flow. You can do so by simply deciding on an accounting year which ends earlier in the tax year and therefore maximising the time between when you earn money and your final tax demand.

8. Tax Reliefs for Your Mortgages. If you have taken out a mortgage in order to buy a property for renting, then you will be able to claim tax relief on the mortgage's interest. As of the 2017, this tax relief will continue to be decreased.

9. Self-Employment Vehicle Costs. If you are self-employed and travel often, you will be able to claim back the costs of keeping your vehicle running. The only catch to this is that you aren't able to claim the costs of buying a vehicle.

10. ISA Allowances. As of the 6^th of April in 2016, the annual cap for a tax-free ISA's allowance will be set at £15,240. This amount has not been increased nor decreased from the 2015 limit. You can put your money into a simple cash ISA or stocks and shares ISA, or even both.

11. Expenses as a Landlord. If you are a landlord, then you are able to deduct costs such as gardeners, cleaners, and renting agencies, from your tax return.

12. Transferring Your Assets. If deemed necessary and if your partner pay lower taxes than you do, then you are able to transfer all of the assets that are under your name to them in order to avoid paying more tax.

13. Marriage Allowance. As of the 6^th of April in 2016, both married couples and civil partners were able to transfer up to £1,100 of their personal allowance to their partner who earns less than them. This can help save them from paying up to £220 more in tax. However, this option is only available if the individual who earns the most pays 20% taxes. If they are in the upper bracket and pay 40%, this isn't a possibility.

14. Personal Savings Allowance. As of the 6^th of April in 2016, if you happen to be a basic tax rate payer then the first £1,000 that you gain through your savings will be tax free. Although, if you happen to be a higher tax rate payer, this amount is lowered to £500. If your savings earnings exceed this amount you will begin to pay tax on them.

15. Renting Rooms. As of the 6^th of April in 2016, the 'Rent a room relief' scheme allows for you to receive up to £7,500, which is a huge increase from the previous £4,250, from lodgers. This money is entirely tax free, however is only applicable if the room you are renting is furnished and is within the confides of your own home.