Author: Dot Piper

We’ve all heard the expression “Born free- taxed to death”, but are you taking full advantage of the opportunities to reduce your tax burden?

One of the first courses of action is to check that you have the correct tax code. If you have an incorrect code you could be over-paying both your income tax and national insurance. The enquiry number for your local office can be found on www.hmrc.gov.uk.

Do you understand your tax code? There is a clear explanation of this, which can be found by logging on to www.direct.gov.uk and finding the heading “Understanding your tax code.”

If you become unemployed and claim unemployment benefits, the tax aspect will be adjusted automatically, but should you not claim these benefits then you may well be able to reclaim some tax. Make sure you keep your P45, which will have been given to you by your last employer and contact your local tax office and ask them for a P50, which is a repayment form.

If you’re under the age of 65, you’ll be able to earn up to £5,035 per year free of tax. Your spouse is entitled to this too, so if their earnings are below that figure, you could transfer any investments to them to make use of the allowance.

The next piece of advice may not concern everyone, but tax credits are there for the taking. It is estimated that £2.9bn is available from Her Majesty’s Revenue and Customs and the Department of Work and Pensions. You may be entitled to pension credit, working family tax credit or child tax credit. There’s a website for this too, www.taxcredits.inlandrevenue.gov.uk or you can call 0845 300 3900 to check eligibility.

With the increasing property values in recent years, more and more people are facing the possibility of inheritance tax being charged on their estate. If the value of your estate exceeds £278,000, then your heirs will be paying 40% tax on the excess. You could think about gifting some money to keep the estate value down. You can give up to £3,000 per year, free of tax.

An ISA is an individual savings account, where the interest is tax free. There is a limit of £7000 per year which you can save totally in stocks and shares if you wish. You are allowed a cash ISA of £3000 per year, in which case you may also hold up to £4,000 in stocks and shares. (£7,000 in total is the limit, of which £3000 can be in cash.)

You can register with your bank or building society to be paid gross interest on your savings if you’re a non-taxpayer. If you have already paid tax on savings and you’re in this non-taxpaying bracket, you can claim the tax back. The Taxback Helpline number is 0845 077 6543.

In the pensions sector, a basic rate taxpayer paying £78 into a pensions scheme will have this topped up to £100 and those taxed at a higher rate will only need to pay in £60, which will be topped up to £100.

Everyone has a capital gains allowance. Currently this is £8,800 per person per year. This can be transferred between spouses to gain the best tax benefit.

There is a tax benefit if you’re renting out a room in your home. You’re allowed to receive up to just over £80 per week (£4,250 per annum) for this, free of tax. For full details of this, go to www.hmrc.gov.uk

Make sure any gifts to charity are effective. Deeds of Covenant, Gift Aid or Payroll giving are a tax efficient way to make your gift really count.

We hope we’ve given you some food for thought. There really is some help out there, now you know where to look for it.