Twelve Ways to Save Tax
- Invest in your own home. If you make a profit when you sell your home this is not subject to income tax. Therefore, you can refurbish your home, extend it or just redecorate it to add to the value and you will not pay income tax on the difference between what you bought it for and what you sold it for.
- Personal Allowance. An individual is entitled to earn up to £11,000 for the tax year 16/17 tax free.
- Rent a Room. If you rent a room in your house to a lodger you are able to receive up to £7,500 for the tax year 16/17 without it being subject to income tax.
- Individual Savings Account (ISA). You are able to invest in either a cash ISA, investment ISA or innovative finance ISA, or a combination of the three up to £15,240 for the 16/17 tax year and the interest will not be subject to tax.
- Dividend Allowance. This is a new allowance introduced from April 2016. An individual is now able to earn up to £5,000 using a tax-free dividend allowance without paying tax.
- Marriage Allowance. If you have not used all of your personal allowance you are able to transfer up to 10% of your allowance to your spouse to set against their taxable income. This can save your spouse up to £220 in income tax.
- Winnings. If you win on a bet, or the lottery these winnings are exempt from income tax.
- Personal Savings Allowance. This is a new allowance introduced from April 2016. It allows individuals to earn up to £1,000 in interest free of income tax.
- Capital Gains Allowance. An individual is allowed to make a gain of up to £11,100 for the tax year 16/17 before you are subject to capital gains tax.
- Premium Bonds. If you win a prize with one of your premium bonds the winnings are exempt from income tax.
- Pension Commencement Lump Sum (PCLS). With many pensions you can take up to 25% of the value of your pension pot as a tax free lump sum. As pension income is usually taxable this can represent a significant tax saving.
- Help to Buy ISA. If you are saving towards your first home, you can save up to £200 per month in a Help to Buy ISA and the government will top this up by 25%, up to a maximum of £3,000. As this money is in an ISA it is free of tax.
By: Olivia Attwood