With the average UK household now paying £1.1million in taxes over their lifetime, Perry’s Chartered Accountants share their top six tips to ensure you don’t overpay.
1. Check your tax number
If you’re a full-time or part-time employee, you likely pay taxes through pay-as-you-earn (PAYE). This means your income tax is deducted at source and goes straight to HMRC. Your tax number is basically a few numbers and a letter, for example 1257L, and will appear on your payslip. These few digits can make a significant difference in the amount of tax you have to pay, and it’s not uncommon for errors to creep in. For example, if you used to have a company car with a gas-guzzling engine but switched to an eco-friendly model, your tax code should be adjusted to ensure you pay less. If you are in doubt about your tax number, speak to your employer or contact HMRC directly.
2. Claim Eligible Expenses
There are a variety of reimbursable expenses for self-employed people that can help reduce your tax burden. These expenses include office expenses, train tickets, and website fees and should be deducted from your total profits, meaning you only pay tax on what’s left after these expenses.
3. Check entitlement to tax-free childcare
If you have children and pay for kindergarten, child care or all-round care, you may be entitled to tax-free child care. Under this scheme, the government pays 20% of your childcare costs, up to a maximum of £2,000 per year per eligible child. Tax-free childcare is just one of several childcare programs available—working parents may also be eligible for varying amounts of free childcare and tax credits. Use the government’s childcare calculator to find out which option is best for your family.
4. Pay into a pension
Most UK taxpayers get tax breaks on the money they put into a pension fund, which means the government tops up payments into your retirement savings fund. For base rate taxpayers, the top-up is 20% – HMRC adds £20 for every £80 you put into a pension fund. As well as this form of tax relief, saving for retirement can lower annual tax bills for those earning more than £100,000 a year. This is because the personal allowance (the annual tax-free earnings allowance, currently set at £12,570) is gradually reduced by £1 for every £2 earned over £100,000. Pension contributions reduce your taxable income. So if these contributions keep your annual income under £100,000, you benefit from the maximum personal allowance.
5. Make the most of your marriage or civil partnership
The Marriage Allowance is a tax benefit that allows a husband, wife or registered partner to transfer £1,260 of their personal allowance to the higher earning partner. To qualify you must not pay income tax or your income must be below the personal allowance (£12,750). Your partner will have to pay income tax at the base rate, meaning their income will be between £12,751 and £50,270 before they receive the marriage grant.
The marriage grant can save up to £252 a year in tax savings, yet around 2.4 million eligible couples do not claim the benefit. The good news, however, is that marriage allowance applications can be backdated up to four years.
6. Save when you’re single
Living alone can have its perks. Don’t forget that most local authorities in England and Wales give a 25% tax rebate to individuals. This can add up to around £300 a year, but many residents fail to claim the benefit.
https://techround.co.uk/news/6-ways-to-make-sure-youre-not-paying-too-much-tax/?utm_source=rss&utm_medium=rss&utm_campaign=6-ways-to-make-sure-youre-not-paying-too-much-tax 6 ways to make sure you don’t pay too much in taxes