In this blog post we’re about to let you in on some of our best tips to reduce your tax bill.

These tips aren’t just for high earners or people liable to pay capital gains tax. If you’re a basic rate taxpayer, there are lots of handy tips on how to pay less tax.

HERE ARE OUR TOP TIPS TO REDUCE YOUR TAX BILL!

1. Check your tax code

The first way to ensure you are paying the right amount of tax is to ensure that your tax code is correct. This code is used by your employer to calculate your tax bill. The code must be correct as it will refer to your personal allowance. This is simply the amount of money you can earn without needing to pay any tax on it.

Each time your situation changes – for example, when you change jobs – you need to check that you have the correct code. We also suggest checking the code annually to ensure you receive the correct personal allowance.

2. Claim tax credits

Tax credits are a useful way to reduce your tax bill as long as you fall into an eligible category.

Working credits are available to a range of people depending on their situation. Single people and couples can save tax with credits if they are over 25 and work more than 30 hours weekly. Disabled people and parents must be at least 16 and work at least 16 hours to claim tax relief credits.

Anyone who is the main carer for a child can claim child tax credits. This money will be paid until the child is 16.

From 2024, these schemes will be replaced by Universal Credit.

Research & Development Tax Credits

If you are a registered company and you are innovating and spending money on a project you may be able to claim back money on what’s called Research & Development Credits.

Creative Tax Reliefs

• Animation Tax Relief 
• Children’s TV Tax Relief
• High End Television Tax Relief
• Museums & Galleries Exhibition Tax Relief 
• Orchestra Tax Relief 
• Theatre Tax Relief
• Video Game Tax Relief 
• UK Film Tax Relief 

3. Pay into a pension scheme

Anyone who makes a personal pension contribution is eligible for tax relief. The amount you receive will depend on your earnings, with a higher rate taxpayer earning more back than basic rate taxpayers.

In most cases, pension contributions will be boosted by 20% when you make them. Some employers will ensure that your pension contributions receive this boost when they come out of your pay. This isn’t always the case, though. Check if you’re receiving the extra amount on your pension contributions. If not, then contact HMRC and make a claim. You have four years to do so.

4. Benefit from marriage allowance

Marriage Allowance is available to anyone who is legally married or in a civil partnership. It is one of the best tax relief schemes for couples.

Through this scheme, one spouse or civil partner can transfer a portion of their income tax personal allowance to their spouse or civil partner. This is capped at 10%.

If both are paying income tax, then this is a good way to double your tax-free allowance, benefiting both of you.

It’s important to note that this differs from “Married Couple’s Allowance”. That is a different tax break, which is only available if one-half of the couple was born before 6.4.1935.

Also, higher-rate taxpayers cannot take advantage of this scheme either.

5. Meet the tax return deadline

Tax planning doesn’t just mean searching for clever tax reliefs. It can also apply to completing your tax return online. If you’re required to complete a self-assessment tax return, then a simple way to pay less is to ensure that you meet the deadline.

For the many people who don’t do this each year, then they’re liable to pay a fine, which can end up costing £1,100.

6. Reclaim overpaid taxes

In certain circumstances, you may have paid more tax than during the tax year you needed to. This can occur if you shouldn’t be registered to pay tax. It can also happen if you lose your job, change your job, or are self-employed. A tax rebate should be claimed in these circumstances.

The reason this happens is because of how your personal allowance is calculated. It is based on a standard, fully-employed, salary worker who earns the same amount monthly. This isn’t necessarily always the case.

You must fill in the R40 form to claim back tax paid.

7. Claim all tax relief due on charitable donations

Making a charitable donation doesn’t just offer you tax benefits; it’s also beneficial for charities and registered Community Sports Clubs. This is because of Gift Aid, which you can add to your donation if you pay income tax. Gift Aid means charities can claim tax relief of 25p on every £1 that is donated to them.

To take advantage of tax savings with donations to charities, you need to make sure to keep a record of all donations you make. Another perk of this scheme is that you don’t just benefit when submitting the previous year’s tax bill. You can claim for the current tax year too.

8. Take full advantage of your personal allowances

At the time of writing, the current tax-free personal allowance is £12,500 per tax year. This amount is for a basic rate taxpayer. If you pay a higher rate, then that amount is reduced if you earn more than £100k net in a tax year.

Married couples have an excellent option to take advantage of your personal allowance if one partner pays a high rate and the other isn’t required to pay tax. To gain extra tax relief, you can put income-producing assets in the non-tax payer’s name.

You should also take advantage of your personal savings allowance. Your income will define your personal savings allowance. Depending on your tax band, you can earn either £500 (higher rate taxpayers) or £1000 (basic rate taxpayers) of interest on savings income without paying tax on it.

This scheme for lowering tax on savings income is not available to anyone who falls into the additional-rate taxpayer band.

9. Choose the best employment status

Some people don’t have the choice to alter their employment status, while others have the ability to register as either self-employed or employed.

If you can register as self-employed, you should consider if this will be the best status for you. Benefits for the self-employed can be outweighed by drawbacks depending on your circumstances. This is especially true regarding pension income, as more relief is offered to the employed than the self-employed in this regard.

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If you need any advice contact us today for a free, no-obligation quote, and let us help you with all your accountant needs! Enjoy your day! 😉