From checking your tax code and how to claim the Blind Person’s Allowance, to claiming tax relief on job expenses and making the most of tax-free allowances, read on for our Tax Advice Service’s top ten ways to save.
The Personal Allowance (the amount you can earn tax-free each year) is frozen at £12,570 from the 2021/22 tax year through to 2025/26. Taxable income includes salary, bonuses, rental income, pension income and certain state benefits, including the state pension.
A tax code is made up of several numbers and a letter that tells your employer or pension provider how much tax-free income you get in that tax year. The default tax code in 2022/23 is 1257L, with an S at the start if you live in Scotland and a C at the start if you live in Wales. The number within the tax code shows the Personal Allowance figure with the final zero dropped.
If you’re registered as severely sight impaired or blind, make sure you claim the Blind Person’s Allowance to reduce your tax bill. It is not added automatically. It adds £2,600 to your Personal Allowance which saves up to £520 in tax for a basic rate 20% taxpayer.
Married couples and civil partners can take advantage of the Marriage Allowance and apply to transfer 10% of their Personal Allowance from one to the other, i.e. £1,260. This saves up to £252 in tax. One partner must be a non-taxpayer and the other a basic rate taxpayer.
If at least one spouse was born before 6 April 1935, you can claim Married Couple’s Allowance instead. This is a more generous benefit which can reduce your tax bill by £941.50.
If your income is too low to use all your Married Couple’s Allowance or Blind Person’s Allowance, you can transfer the full allowance or the unused part to your husband, wife or civil partner.
You can claim tax relief for part of your household running costs, e.g. gas, electricity, water, telephone, internet, if you’re ‘required’ to work from home. For a basic rate taxpayer this saves £62.40 a year and £124.80 a year for a higher rate taxpayer.
You can claim tax relief if you wear a uniform for work, such as a branded T-shirt, nurse or police uniform. It’s worth £12 a year for 20% taxpayers and £24 a year for 40% taxpayers.
You can backdate claims for tax allowances and reliefs up to 4 previous tax years and claim back any tax you have overpaid.
Contributions to your employer's pension scheme can be made from your gross pay before any tax is charged. The government will top up your pension with tax relief.
Donating through Gift Aid means charities can claim an extra 25p for every £1 you give. It will not cost you any extra. So, if you donate £10 and use Gift Aid, it’s worth £12.50 to the charity. Higher and additional-rate taxpayers can reclaim tax on their Gift Aid donations.
Those on low incomes should check they will have paid enough tax during the year to Gift Aid their donations. If you haven’t paid enough tax, you may get an unwelcome tax bill!
The rent-a-room scheme lets you receive up to £7,500 a year from a lodger tax-free. To qualify you must offer fully furnished accommodation in your main home. You don't need to own the property to qualify, but if you rent you'll need your landlord's permission to sub-let.