You’re probably already thinking – this sounds too good to be true. Fair enough. I would think that too! Nevertheless, there are totally legitimate ways that people can rearrange their financial affairs and pay less tax. Let’s look at ways to pay less tax.
Tax Relief On Pension Payments
Most contributions workers make to workplace pensions should get tax relief, depending on your tax rate. So 20% should be added automatically at source, meaning for every £100 you put in your pension, you actually only pay £80. If you’re a higher rate tax payer (at 40%), you might need to claim this back.
So the more you put into your pension (up until a certain point), the less tax you could be paying. Plus you’ll hopefully get a bigger pension pot when you retire, which is always a good thing!
How To Pay Less Tax – Share Your Personal Allowance With your Partner
You don’t start paying income tax until you earn more than £11,850. This is known as the Personal Allowance. The government is determined to raise this further, so expect the amount to rise with each passing tax year. Thus if you earn this or less and are married there’s a way to give some of your tax-free allowance to your partner.
It’s called the Marriage Tax Allowance. This tax break is for couples who are either married or in a civil partnership. As long as one of you earns less than £11,850 and the other one earns less than £46,350, you can move across 10% of that personal allowance to the higher earner. For this financial year the allowance is worth up to £238. You can back claim for the last three tax years too.
How To Pay Less Tax – Rent Your Spare Room
You can earn £7,500 a year tax-free if you rent out your spare room. You’ll have to pay tax though if you bring in more than this amount.
Not All Earnings Are Taxable
For example, if you earn under a £1000 on eBay in a tax year, that is not considered income. Also, any earnings from gambling are not counted as taxable income. This is not to suggest you should gamble away your money. No instead, try matched betting, whereby you use offers from bookmakers to earn money risk-free. Many make a full-time income this way, and not a single penny is taxable.
