Whilst you probably aren’t keen on investing extra money presently due to market volatility and geopolitics, you can cut your tax bill as a hedge aganst rising inflation.
Using Your Salary
Sometimes the government lets you negate part of your wage to spend on tax free items. Things like cycling to work and schemes associated with technology. It might be worth talk to your company about what kind of wage sacrificing scheme they could offer. This is not going to change your take home pay but it will help you save some tax.
Asset Sharing
You are able to pass assets between you and your spouse that produce an income. This won’t trigger a taxable event and therefore bill. Should one of you be getting close to the limit of your allowance this may help.
Marriage Allowance
Of two spouses, one being a basic rate taxpayer and the other being a non taxpayer, the non taxpayer is allowed to gift £1260 to the basic rate tax payer in that tax year.
If you’re a non taxpayer and you earn £10000 and your partner is earning £40000 – taxable income is £27430 because you need to take off the tax free £12570.
If you claim allowance as the non taxpayer you can transfer £1260 of your personal allowance to your partner. Your partner gets a credit of £1260 and your allowance will become £11310.
Adding To Your Pension
A tax efficiency way of putting money aside for when you retire is by adding to your pension. You are able to shelter long term savings from capital gains tax and dividend, lower your income and reduce your tax liability.
You can take the first 25% pension drawdown free of tax at age 55. You can also receive a government top up as tax relief when contributing into your pension.
Even if you don’t pay any tax, if you are younger than 75 you’ll receive basic rate tax relief on what you contribute into your pension.
You can receive tax relief from the government on up to $40000 in earnings across your pensions. For earnings of less than £3600 you are able to still add $3600 with tax relief.
There are further benefits should you be a high rate taxpayer. Through your return you are able to claim 20 or even 25% further in tax relief.
To ensure you are managing your tax entitlements efficiently, talk to one of our FCA authorised wealth managers by arranging a Discovery Call [Here]
This article is for informational purpose only. It does not constitute finacial, tax or legal advice, nor is it a recommendation to buy, sell or hold any investment. Past performance is not a guide to the future, investments rise and fall so investors could make a loss. No view is given on the present, future value or price of any investment and investors should form their own view on any proposed investment.