Eight ways you can bolster YOUR budget with tax savings

Millions of households will see a boost to their finances thanks to bold measures announced in Friday’s massive ‘mini-Budget’. Workers will receive an increase in their pay package in November after Chancellor Kwasi Kwarteng reversed the national insurance increase of 1.25 percent in April. Someone who earns £30,000 gets £218 back in his pocket, while someone with £50,000 gets to keep £468 extra from his income.

Another boost comes in the form of lower income tax rates, with the base rate falling by one percentage point to 19 percent from April next year. The additional 45 percent rate has been scrapped altogether — a huge boon for the highest-paid workers.

But why stop there? There are plenty of smart ways to lower your tax bill yourself, some of which can increase your wealth by thousands of pounds. All it takes is a little time, planning and knowing where to start.

1) How do you keep your savings tax free?

All savers have a personal savings deduction, meaning base rate taxpayers can earn £1,000 in interest without paying tax, while higher rate taxpayers can earn £500 tax-free.

For more than a decade, this fee has been more than enough to protect most people’s savings from tax. That’s because the savings rate has been so low that you would need a huge nest to break the allowance.

But as interest rates are now rising rapidly, savers should be careful.

For example, Atom Bank currently offers a best-paying interest of four percent on a two-year fixed-income savings account. A base rate taxpayer would be in violation of his deduction if he had more than £25,000 in this account. A higher rate taxpayer would breach it with a savings of over £12,500.

This is where cash Isas really come into their own. It allows savers to deposit up to £20,000 each tax year without paying a cent in tax.

Cash Isa rates lagged behind regular savings accounts but are now starting to catch up. The most accessible Isa currently pays 1.75 percent and is offered by Gatehouse Bank.

2) Lower your tax bill by donating to charity

When you give money to a charity with Gift Aid, the donation is completely tax free. The charity can reclaim the tax from the tax authorities. That means for every £100 donation you make, the charity can recover another £25.

However, if you are a higher rate taxpayer, you can also claim some tax back yourself. Since you pay 40 percent in taxes and the charity reclaims 20 percent in Gift Aid, you can reclaim the remaining 20 percent.

For example, if you donate £100 to charity, they will claim £25 to Gift Aid and you can personally reclaim another £25. You can submit the claim on your tax return, or call the Tax Authorities and Customs to request it.

3) Reduce your spouse’s tax bill now

Married couples can reduce their combined income tax assessment by passing their personal allowance between them. You can transfer £1,260 of your personal deduction each year, which equates to a tax reduction of up to £252.

The personal allowance is currently £12,570 and this is the amount anyone can earn without paying a penny of income tax. Now suppose you earn $11,500 per year and your partner earns $20,000. You can transfer €1,260 of your personal allowance to your partner. This means that your partner may reduce the amount on which she pays income tax by that amount. The two of you pay £214 less in tax. You can antedate claims by four years, giving a maximum savings of £1,242. You can check if you qualify and if you can save money by calling the Income Tax Office on 0300 200 3300.

4) Make gifts to loved ones

Families paid a record £3 billion in estate taxes last year, twice as much as a decade ago.

But there are a number of steps you can take to lower the bill on your estate.

First, you may not have to pay taxes after all. Individuals can leave up to £325,000 tax-free and married couples can combine their allowances. If your estate consists of a family home worth up to £1million, it can be transferred without having to pay tax. Second, you can take action during your lifetime to bring down a potential bill. For example, you can make donations of up to £3,000 per year tax-free. You can also give as many gifts up to €250 per person per year as you wish. You can also give £5,000 to a child getting married or entering into a civil partnership, or £2,500 to a grand- or great-grandchild, or £1,000 to another person.

Paul Barham, partner at global accounting firm Mazars, says: ‘There’s another handy rule that allows you to donate as much of your income as you can afford, provided you don’t deprive yourself in the process. The beneficiary does not have to pay inheritance tax on the gift after your death.’ Keep a record of gifts you make in this way.

5) Earn Tax Free Money on the Side

If you occasionally rent out a room, make money by selling on eBay, or babysitting, there’s a special tax break for you. If you earn less than £1,000 in a tax year from these so-called side issues, you don’t have to declare or pay any tax on it.

6) Get free money to save for your future

Pension contributions are a golden option if you want to keep more of your money. You do not have to pay income tax on the money you save for pension.

So if you’re a base rate taxpayer, every £80 you contribute to your pension is topped up by the government to £100. If you’re a higher rate taxpayer, you only have to pay £60 to get £100 into your pension. to receive a pension. Employers are also required to put into employees’ pots, making retirement contributions an extremely effective way of saving.

7) Hold child support

Families are entitled to child support as long as neither parent earns more than £60,000. As soon as this threshold is exceeded, the benefit is withdrawn.

The child benefit is € 21.80 for the oldest or only child and € 14.45 for each additional child.

However, if a parent earns more than £50,000, they may have to repay all or part of the child support. If they make more than £60,000, it will be lost altogether.

However, there is a trick that could mean that high earners don’t have to give up child support altogether.

Dominic McLoughney, director of Becketts FS, says, “You may be able to make additional retirement contributions to lower your net pay.

‘As a result, you could fall below the threshold for losing child benefits. If done right, a parent making £60,000 could save as much as £6,836 this tax year.”

8) Finally, pass on your pension

Pensions can be a tax-efficient way to pass on wealth, as they are not included in the inheritance tax when adding up the value of your estate.

In addition, if you die before age 75, your children can inherit your retirement savings without having to pay inheritance taxes. If you are older than 75, they pay income tax on this.

Joshua Gerstler, financial planner at The Orchard Practice, says: ‘The current pension benefit is £1,073,100, so a husband and wife can save £858,480 in estate taxes by maximizing their pensions throughout their lives.’