Maximizing Your Income Tax Savings: Expert Tips from HMRC
As the end of the tax year approaches, it’s time to start thinking about how you can maximize your income tax savings. The UK tax system can be complex, but with the right knowledge and guidance, you can make the most of the tax allowances and reliefs available to you. In this article, we’ll share expert tips from HMRC to help you reduce your tax bill and keep more of your hard-earned money.
1. Use Your Personal Allowance
Your personal allowance is the amount of income you can earn before you start paying income tax. For the tax year 2021/22, the personal allowance is £12,570. If you earn less than this amount, you won’t have to pay any income tax. If you earn more than this amount, you’ll only pay tax on the amount above the personal allowance.
- Make sure you’re claiming your personal allowance if you’re eligible.
- If you have a spouse or civil partner who earns less than their personal allowance, you may be able to transfer some of your personal allowance to them.
2. Make Use of Tax-Advantaged Accounts
There are several tax-advantaged accounts that can help you save on income tax:
- Individual Savings Accounts (ISAs) – You can save up to £20,000 per year in an ISA, and any interest or investment gains are tax-free.
- Pension schemes – Contributions to a pension scheme are tax-deductible, which means you can reduce your taxable income by the amount you contribute.
- Enterprise Investment Schemes (EIS) – Investing in an EIS can provide income tax relief of up to 30% of the amount invested.
3. Claim Tax Relief on Work Expenses
If you have to pay for work-related expenses out of your own pocket, you may be able to claim tax relief on them. This can include things like travel expenses, equipment costs, and professional fees.
- Make sure you keep receipts and records of any work-related expenses you pay for.
- You can claim tax relief on expenses that are wholly and exclusively for the purposes of your work.
4. Take Advantage of Marriage Allowance
If you’re married or in a civil partnership, you may be able to claim Marriage Allowance. This allows you to transfer some of your personal allowance to your spouse or civil partner if they earn less than you.
- You can transfer up to 10% of your personal allowance to your spouse or civil partner.
- Your spouse or civil partner must earn less than the personal allowance.
5. Consider Making Charitable Donations
If you make charitable donations, you may be able to claim tax relief on them. This can include donations to registered charities, community amateur sports clubs, and certain political parties.
- You can claim tax relief on donations made through Gift Aid.
- You can also claim tax relief on donations made through your payroll if your employer has a Payroll Giving scheme.
Maximizing your income tax savings can seem daunting, but with the right knowledge and guidance, it’s possible to reduce your tax bill and keep more of your hard-earned money. By using your personal allowance, making use of tax-advantaged accounts, claiming tax relief on work expenses, taking advantage of Marriage Allowance, and considering making charitable donations, you can make the most of the tax allowances and reliefs available to you. Remember to keep records of your expenses and donations, and seek professional advice if you’re unsure about anything.