7 simple ways to cut your tax bill
Unbiased.co.uk TaxAction research has found the UK wastes £4.7 billion in tax inefficiencies. This quick checklist will help you start to bridge the gap.
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1. Use your ISA allowance
Your individual savings account (ISA) allowance allows you to save up to £5,760 in a cash ISA or £11,520 in a stocks and shares ISA in the 2013/14 financial year, free of income tax and capital gains tax.
Did you know? Given time, you could become an ISA millionaire. One couple is said to have £6 million in their ISA pot
2. Switch savings into your partner’s name
If you pay a higher rate of income tax than your partner, consider shifting any savings into their name. But remember, the money now belongs to them.
Did you know? Every year, savers lose £1.3 billion a year by failing to be tax efficient
3. Don’t forget CGT
Everybody can take capital gains worth up to £10,900 in the current tax year, without paying any tax.
Did you know? One in three independent financial advisers say capital gains tax is the most under-used tax allowance
4. Tax relief on pension contributions
You can get tax relief of up to 45 per cent on your pension contributions. You can even claim tax relief you have missed out in the last few years.
Did you know? More than 180,000 higher-rate taxpayers miss out on £230 million each year by failing to claim pensions tax relief. That’s an average of £1,255 each
5. Offset
If you have cash in the bank, you pay tax on the interest. If you use it to pay down your mortgage, there is no tax bill at all. That’s because you are saving interest, rather than earning it.
Did you know? Overpaying £250 a month on a £100,000 mortgage charging 4.38 per cent would save you £12,242 in interest. If you saved that money at the market average deposit rate of 0.45 per cent, you would earn just £2,336 in interest (and pay tax on it)
6. Inheritance tax
Rising house prices are driving up inheritance tax bills. You can reduce your family’s liability by careful gifting, or placing family assets in a trust.
Did you know? Britons are set to wast £530 million worth of inheritance tax relief in 2014, up from £472 million in 2013
7. Use your children’s tax free allowances
If you don’t use your children’s tax free allowances, you are unnecessarily handing money to the tax man. You can pay up to £3,720 into a junior ISA this year for tax-free returns, and even claim 20 per cent tax relief on contributions to a stakeholder pension in their name.
Did you know? If you paid the maximum allowance into a stakeholder pension from the year your child is born, they would have £491,120 by age 38, assuming 6 per cent annual growth
Why not? See how much you could save by using the unbiased.co.uk Tax Waste calculator?
Read about the unbiased.co.uk TaxAction campaign 2014.
Something to think about: Don’t assume you cannot reduce your tax bill – use specialist advice to help you reduce the amount you currently give to the taxman.
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About the author
Alan Smith is the CEO of Capital Asset Management. His specialisms include: wealth management, strategic financial planning and creative tax planning.
Please note: The opinions, beliefs and viewpoints expressed by our contributing authors do not necessarily reflect the opinions, beliefs and viewpoints of unbiased.co.uk.
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