Author: Dot Piper

Life is taxing enough without parting with more of your hard-earned cash than you need to. There are lots of ways in which you can trim down your tax bill.

The current tax allowance for people under 65 is £5,035 per annum. This is a tax free amount and when your income rises above this, income tax will become due. It may be that your spouse is either not earning or is a low earner. You could think about transferring investments to him or her to make use of their allowance.

Is your tax code correct? If not, you could be paying more tax and national insurance than you should. It’s very easy to check your tax code and the government website offers a full explanation of how to do this. www.direct.gov.uk

If you’ve left your job and not applied for unemployment benefit you should be able to get a tax repayment. You will need to apply to your tax office for a repayment form P50. You will also need the P45 which your employer gave you with your final wage payment.

Her Majesty’s Revenue and Customs and the Department of Work and Pensions have £2.9bn of tax credits on offer. You may be entitled to one of three credits. There’s child tax credit, working family credit or pension credit. www.taxcredits.inlandrevenue.gov.uk is the place to check.

An ISA offers a way of earning tax-free interest. You can have £7000-worth of stocks and shares, or alternatively invest £4000 in stocks and shares and £3000 in cash. As long as the ISA is in place, the interest will be tax-free.

Building society and bank interest is normally paid after deduction of tax. If you’re a non tax-payer you can request that you receive your interest gross. Should you have already had tax deducted, you can claim a tax refund. The Taxback Helpline phone number is 0845 077 6543.

The taxman will help you with your pension contributions too. This varies according to your tax rate. If you’re a basic rate taxpayer, for every £100 invested in a scheme, the tax man will contribute £22, so you only part with £78. Higher rate taxpayers would only need to contribute £60 for £100-worth of investment.

If your estate is worth £278,000 or more, it would come into the inheritance tax bracket of 40%. It may well be that your home alone is approaching that figure. To lessen the tax burden on your heirs, it may be worth considering gifting money; you can give up to £3000 per year tax free.

You are allowed to earn up to £4,250 by renting out a room in your home. This is free of tax, but apparently you should declare the fact that you are taking advantage of this scheme. You can find details and help on www.hmrc.gov.uk

There is a Capital Gains allowance, which is currently £8,800. This is a yearly tax-free allowance. This is transferable between spouses to maximise assets.

Charity Begins at Home? Lastly, if you donate to charity, the use of a tax-efficient deed of covenant, payroll giving or Giftaid means that the taxman will give his support too!