Five simple ways to save personal tax
1. Make the most of your pension
Using a pension to save for retirement also enables you to save on tax because pension contributions qualify for tax relief. Basic rate taxpayers receive tax relief at a rate of 20 per cent; higher rate taxpayers, 40 per cent; and additional rate taxpayers, 50 per cent.
2. Use your spouse
You can save on tax by sharing your income tax personal allowance with your spouse. Currently, you pay no tax on the first £7,475 of income per person per year. By moving assets into the lower paid spouse’s name, you can pay income tax – or capital gains tax – at a lower rate.
3. Get an ISA
Paying into a standard savings account means you must pay tax on interest. You can avoid this by investing in an ISA. This tax-free way of saving enables you to invest up to £10,680 in an ISA each tax year.
4. Consider offshore bonds
Any money you make offshore is almost tax-free. You pay tax when you cash in or sell, so it pays to do this later in life when you may be a lower-rate or non-taxpayer. If you retire overseas, you could cash in your bond in a country where the tax rate is lower than the UK.
5. Check your tax code
People rarely check their tax code is correct – but if this is wrong, you could be paying too much tax and be eligible for a rebate. If you think there’s been a mistake, contact your tax office.
Written by TonyMedcalf, head of tax at Moore and Smalley.