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5 ways to reduce your tax bill
With income tax receipts expected to reach record highs for the 2019/20 tax year, we offer some top tips to help bring your tax bill down.
Important notes
This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.
All eyes are on the potential tax rises next year. But the government doesn’t have to hike taxes in order to take more cash from our pockets.
In the 2019/20 tax year, the higher rate tax threshold was raised and it’s been estimated the total amount of income tax we have paid has increased to an incredible £193.2 billion.
And while most people want to pay their fair share of tax, nobody needs to pay over the odds. We look at five simple steps that could help bring your tax bill down.
Remember tax rules can change and their benefits will depend on your individual circumstances. Our financial advisers can give you information on how to make use of your tax allowances through financial planning but are not tax advisers. If you need complex tax calculations, we recommend speaking with an accountant.
This article and guides aren’t personal advice. If you are unsure whether an investment or course of action is right for you seek advice. All investments and any income they produce can fall as well as rise in value, so you could get back less than you put in.
5 tips to help pay less tax
1 – Consider using your ISA allowances
ISAs are one of the most tax-efficient ways to save and invest.
You can put up to £20,000 this tax year into an ISA. If your investments grow, you won’t have to pay capital gains tax. And if you’re investing for income, you won’t pay UK income tax either.
More about ISAs, the benefits and risks
2 – Consider making pension contributions
Investing in a pension for retirement is another way to efficiently save tax. Just like ISAs, there’s no UK income tax or capital gains tax on investments held in a pension.
If you're a UK resident, under 75 and not drawing from your pension, you can contribute as much as you earn (up to £40,000) to pensions each tax year and receive tax relief.
Remember, money in a pension cannot normally be accessed until age 55 (57 from 2028).
Annual allowance factsheet – what you need to know
More about pensions, the benefits and risks
3 – Use any unused allowance from previous years
If you have any unused pension annual allowance from the past three tax years, you might be able to use it this year – effectively increasing this years’ allowance. Any personal contributions are still limited by your earnings.
Find out more about pension carry forward
4 – Pay into a pension for your partner
Investing in a pension for a non-earning partner is one of the more generous pension give-aways. Non-earners under 75 that are UK resident can make a pension contribution of up to £2,880 and the government will add up to £720 in basic rate tax relief.
From age 55 (57 in 2028), up to 25% of the value of the pension fund can normally be taken as tax-free cash, with the balance being taxable as income.
However, if further withdrawals fall within the individual’s personal allowance each year, these will also be tax free.
5 – Transfer investments to your spouse or civil partner
If your spouse pays less tax than you, or no tax at all, then they could be losing out on valuable allowances each year. This includes the personal allowance, personal savings allowance, dividend allowance and capital gains tax allowance. You can gift investments to your spouse free of capital gains tax.
For more tax saving tips:
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Details of the Offer
2. To be eligible you must contact our Advisory Helpdesk between 18 December 2020 and the close of business on 12 February 2021 either by calling 0117 317 1690 or by booking a call back with us by close of business on 12 February 2021. You must also decide that you wish to receive Investment Advice from us, and have signed and returned an Adviser Charge Agreement, by close of business on 26 March 2021.
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Important notes
This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.
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