How to pay less tax There are lots of ways to reduce your tax bill legally, whether you're an employee or self-employed, a landlord, investor or pensioner.
Here are 30 simple tips and tricks that can help you cut your tax bill to put more pounds in your pocket. 🔥
Here are 30 simple tips and tricks that can help you cut your tax bill to put more pounds in your pocket. 🔥
1. Check your tax code
Your tax code indicates how much tax HMRC will collect from your salary. You can find it on your payslip. Check your tax code each year, or after changing jobs, to make sure it's correct for your situation.
Your tax code indicates how much tax HMRC will collect from your salary. You can find it on your payslip. Check your tax code each year, or after changing jobs, to make sure it's correct for your situation.
2. Claim tax credits
Tax credits provide extra money to those looking after children, disabled workers and other workers on low incomes. The two main types you can claim: working tax credits and child tax credits.
Tax credits provide extra money to those looking after children, disabled workers and other workers on low incomes. The two main types you can claim: working tax credits and child tax credits.
3. Pay into a pension scheme
Contributions to your employer's pension scheme (including any additional voluntary contributions you make) can be made from your gross pay, before any tax is charged.
Contributions to your employer's pension scheme (including any additional voluntary contributions you make) can be made from your gross pay, before any tax is charged.
4. Benefit from marriage allowance
Marriage allowance benefits couples where one partner earns less than the personal allowance. If you're married or in a civil partnership, you can transfer any unused personal allowance from the lower-earning partner Up to £1,250
Marriage allowance benefits couples where one partner earns less than the personal allowance. If you're married or in a civil partnership, you can transfer any unused personal allowance from the lower-earning partner Up to £1,250
5. Meet the tax return deadline
If you're one of the 12m people who need to submit a self-assessment tax return, make sure you don't miss the deadline - it's a costly and easily-avoided mistake.
If you're one of the 12m people who need to submit a self-assessment tax return, make sure you don't miss the deadline - it's a costly and easily-avoided mistake.
6. Reclaim overpaid taxes
If you are a non-taxpayer, or your income unexpected falls during a year, you may find that you've been taxed more than you should have done, as HMRC assumes your personal allowance is equally used each month.
If you are a non-taxpayer, or your income unexpected falls during a year, you may find that you've been taxed more than you should have done, as HMRC assumes your personal allowance is equally used each month.
Employee tax benefits
7. Get a season ticket loan
8. Claim tax-free childcare
9. Get a company car
10. Switch to a low-emission car
7. Get a season ticket loan
8. Claim tax-free childcare
9. Get a company car
10. Switch to a low-emission car
Cut tax on your savings
11. Maximise your personal savings allowance
12. Make the most of your Isa allowance
13. Use the starter rate for savings
11. Maximise your personal savings allowance
12. Make the most of your Isa allowance
13. Use the starter rate for savings
Pay less tax if you're self-employed
14. Tax-deductible expenses
Many expenses incurred while running your business can be deducted from your profits, reducing your overall tax. This could include things like fuel, phone costs, or running costs for your home office.
14. Tax-deductible expenses
Many expenses incurred while running your business can be deducted from your profits, reducing your overall tax. This could include things like fuel, phone costs, or running costs for your home office.
15. Self-employed car costs
You can generally claim the running costs of a car you use for business (though not the cost of buying one). If you use the same car in your private life, you can claim a proportion of the total costs.
You can generally claim the running costs of a car you use for business (though not the cost of buying one). If you use the same car in your private life, you can claim a proportion of the total costs.
16. Cash-flow boost for self-employed
As a business owner, you can choose when your accounting year ends - and it's worth choosing carefully.
As a business owner, you can choose when your accounting year ends - and it's worth choosing carefully.
17. Annual losses If you make a loss in one tax year, you can carry it forward and offset it against profits from a more successful year. This decreases your taxable income.
18. Payments on account
Self-employed people will be required to pay tax in two advance payments - in January and then July. The amount you'll pay will be based on the previous year's tax. If you expect to earn less than in the year before, you can apply to reduce them
Self-employed people will be required to pay tax in two advance payments - in January and then July. The amount you'll pay will be based on the previous year's tax. If you expect to earn less than in the year before, you can apply to reduce them
Cut your investments tax bill
19. Dividend allowance
Each year, you can earn a certain amount of income from dividends before paying tax. This was reduced on 6 April 2018 - but you can still earn up to £2,000 in dividend income without paying tax each year.
19. Dividend allowance
Each year, you can earn a certain amount of income from dividends before paying tax. This was reduced on 6 April 2018 - but you can still earn up to £2,000 in dividend income without paying tax each year.
20. Capital gains tax (CGT) allowance
Is the profit you make from selling certain investments, including crypto and shares. Capital gains of up to £12,300 are tax-free in 2020-21. Married couples and civil partners who own assets jointly can claim a double allowance of £24.6k
Is the profit you make from selling certain investments, including crypto and shares. Capital gains of up to £12,300 are tax-free in 2020-21. Married couples and civil partners who own assets jointly can claim a double allowance of £24.6k
21. No CGT on shares held in an Isa
You won't pay capital gains tax when you sell shares or units held in an Isa.
You won't pay capital gains tax when you sell shares or units held in an Isa.
23. Junior Isas
When making gifts to your own children, you can avoid paying tax on the interest by paying into a junior Isa.
When making gifts to your own children, you can avoid paying tax on the interest by paying into a junior Isa.
24. Switch to capital-boosting investments
If your investments held outside an Isa are generating a substantial income, higher- and additional-rate taxpayers might be able to cut their bill by switching to investments targeting capital growth.
If your investments held outside an Isa are generating a substantial income, higher- and additional-rate taxpayers might be able to cut their bill by switching to investments targeting capital growth.
25. Invest with an Enterprise Investment Scheme
To encourage investments in early-stage businesses, the government offers extra tax relief on some investments.
To encourage investments in early-stage businesses, the government offers extra tax relief on some investments.
26. Make the most of Venture Capital Trusts
Similarly, Venture Capital Trusts (VCTs) also offer 30% tax relief, but only on investments up to £200,000. VCTs are a specialist type of investment trust, meaning the investments are managed by a fund manager, rather than chosen you
Similarly, Venture Capital Trusts (VCTs) also offer 30% tax relief, but only on investments up to £200,000. VCTs are a specialist type of investment trust, meaning the investments are managed by a fund manager, rather than chosen you
27. Buy shares through your company
If your employer offers free shares or the right to buy shares at preferential rates through a government-approved scheme, the value of shares is exempt from income tax and National Insurance.
If your employer offers free shares or the right to buy shares at preferential rates through a government-approved scheme, the value of shares is exempt from income tax and National Insurance.
Save on property income tax
28. Use the Rent-a-Room relief
The Rent-a-Room scheme allows you receive up to £7,500 in rent each year from a lodger, tax-free
28. Use the Rent-a-Room relief
The Rent-a-Room scheme allows you receive up to £7,500 in rent each year from a lodger, tax-free
29. Landlord's expenses
If you rent out property, you can deduct a range of costs from your taxable income.
If you rent out property, you can deduct a range of costs from your taxable income.
30. Landlord's replacement of domestic items
Landlords can claim tax relief on money spent to replace 'domestic items' in their furnished rental properties.
Landlords can claim tax relief on money spent to replace 'domestic items' in their furnished rental properties.
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