We’ve all felt that sinking feeling inside when we look at our paycheck to see a sizeable chunk has been seized by the tax man only to have never been seen again. But did you know just by taking a few simple measures everyone can cut their costs to the HMRC and best of all it’s 100% legal.
If you are looking to increase your savings, pay off existing debts or even put towards next year’s family break. This can all be achieved through the effective use of tax breaks and allowances.
There are now many high street banks offering fantastic personal savings accounts, increased ISA allowances, and new tax breaks for people looking to invest.
All these services are not only legal but approved by Her Majesty’s Revenue & Customs.
I Already Have An ISA, What Else Can I Do ?
In April 2017 the annual personal allowance for UK residents increased to £11,500 which has offered some additional relief to low income households.
However, if you are married you have an opportunity to transfer an additional £1,100 of personal allowance to their partner on the condition they share the same tax bracket.
To make full use of this increase in personal allowance, Income yielding savings can be transferred from the higher earner into the name of the lower earner.
If you reside in the basic tax bracket you entitled to £1000 of tax free savings. This entitlement is increased further by our personal ISA allowance of £20,000 which is ideal for protecting your savings from Income tax and Capital Gains Tax.
Use Your Pensions Allowance As A Savings Account
A retirement plan is not only an investment on your future but also one of the most tax efficient ways to save.
At present tax relief is granted on any money paid into a pension, with the government contributing 20 pence, for every 80 pence paid in.
If you are not withdrawing from your pension fund and are under 75 years of age, you can pay in anywhere up to a whopping £40,000.
Inheritance Tax Allowance
The passing of a loved one is an awful experience, but if you are writing a will you should be aware that under current HMRC regulations up to £325,000 can be passed onto a loved one without tax. Giving some added reassurance that your family and friends will be looked after.
You can also gift up to £3,000 of assets or cash to any person of your choosing completely tax free.
If you haven’t used this allowance before it is wise to be aware that unused allowances from the previous tax year are carried forward allowing you to gift up to £6,000 of tax free income.
A married couple investing in selected stocks and shares could net up to £10,000 in tax free investment payouts per annum. While a bachelor or bachelorette is able to earn up to £5000 if they are savvy on the stock market.
Pension For Your Partner
A fantastic way to maximise your personal tax allowance is to invest in a pension for a non earning spouse or partner. Under current guidelines a non earning party can contribute up to £2,800 into a pension plan tax free with the government contributing a further £720 per annum.
We hope by reading this article you have learned some new methods to help you make the most of your income. Simply by using current guidelines you can gain substantial savings 100% legally and on your existing income.
Remember these tax breaks are here for us to use and can be rather rewarding.
If you are interested in more ways to save or simply wish to learn where your tax goes you can speak with one of our many tax agents that will be able to answer any questions you may have.