When you see a headline like the one for this article it is natural to feel suspicion towards what appears to be an outlandish claim. And who could blame you? But this article is not about some crazy scheme that wipes your tax liability. It is not dodgy. It is just simple, logical advice, that could help you make modest reductions on your tax bill. This is how to lower your tax bill.
Pension Payments Tax Relief
If you work for an employer and for this reason pay towards a workplace pension, then you should receive tax relief. This depends on what tax rate you pay on earnings. So if you pay 20% tax, then for every £100 you place into a pension pot, you only pay £80 as 20% is paid for you as relief. For higher tax rates the process may not be automatic and you may have to make a claim to get your relief.
Because of this rule, the more you put in, the more you get out. And the more relief you receive. And the bonus is a bigger pension pot at the end of it all!
Share Your Personal Allowance With your Partner
You don’t begin paying income tax until you procure more than £11,850. This is known as the Personal Allowance. The government intends to raise this further in the coming years. Thus, anticipate that the sum should ascend with each passing duty year, up to a point. Accordingly in the event that you acquire this or less and are hitched there’s a method to give a portion of your tax-exempt recompense to your accomplice.
It’s known as the Marriage Tax Allowance. This tax reduction is for couples who are either hitched or in a common organization. Up to one of you acquires under £11,850 and the other one procures under £46,350, you can get across 10% of that individual stipend to the higher worker. For this monetary year the recompense is worth up to £238. You can back case for the last three assessment years as well.
How To Lower Your Tax Bill – Rent Your Spare Room
You can earn £7,500 a year tax-free if you rent out your spare room. Anything above that amount attracts tax, so keep that in mind. It could be a handy earner for those that do not mind having to co-habit with someone they may not be overly close to.
How To Lower Your Tax Bill – Not All Income Is Taxable
One obvious example is sales on auction sites. Should you earn under a £1000 on eBay in a tax year, as many will do, that is not income. as far as the government is concerned Also, any earnings from gambling are not counted as taxable income. This is not to suggest you should gamble away your money. No instead, give matched betting a go, whereby you use offers from bookmakers to earn money risk-free. Many make a proper income this way, and not a single penny needs to be declared in a tax return. In these tough times it is worth considering as very easy income.
Expenses
Working from home? Then you can claim £6 a week on energy bills for starters. But there are a host of other expenses that self-employed people can submit, which is subtracted from their submitted income for the year. Check the government site for full guidance on what can and cannot be claimed.
