People across the UK could be paying more tax than they need to – and experts have highlighted ways to save money.
British taxpayers are facing record bills, with HM Revenue and Customs (HMRC) collecting more than £82 billion in July.
There are however ways you can avoid paying more than you need to – all of which are legal and sometimes not particularly well-publicised.
These include salary sacrifices, marriage allowances, pension tax relief and more.
We’ve looked at eight ways to potentially save on your tax bills.
1. GiftAid
Around £560 million of GiftAid goes unclaimed each year, according to the MailOnline.
Any donations to charity are free of income tax, and online forms often have an option to GiftAid, meaning the charity can claim the tax back and therefore boost the amount of money it gets from your donation.
However, a charity can only claim the basic rate, and those on higher or additional tax rates can claim it back themselves by noting on their tax returns how much they have donated to charity, or contact HMRC directly.
2. Claim for washing work uniforms
If you wear a uniform for work you can claim a rebate for washing it, repairs, or replacements.
HMRC says you can claim for any uniform if a person in the street would recognise where you work – even if you wear it infrequently.
While some professions get more, the standard allowance for this is £60, meaning you can get back the tax paid on £60 of your income when you claim – which is £12 for a basic rate taxpayer.
There are more details on specific allowances on HMRC’s website.
3. Salary sacrifices
Your employer may offer a salary sacrifice scheme that offers a benefit of the same cash value, with the difference being that you pay no tax or National Insurance on the benefits – potentially saving money depending on what is on offer.
However, some items purchased through salary sacrifices, such as petrol cars, do require tax to be paid as they count as a ‘benefit in kind’
Salary sacrifice schemes vary by company, and some do not have them at all. There is also the risk you may get a lower payout if you are made redundant due to the fact your headline salary is lower than it would be without them.
4. Membership fees and subscriptions
Some jobs require you to be a member of a professional body in order to carry out your trade. HMRC has a full list of professional organisations on its website.
You can claim tax reliefs on these memberships if ‘you must pay the fees to be able to do your job’ and on ‘annual subscriptions you pay to approved professional bodies or learned societies, if being a member of that body or society is relevant to your job’.
However, you cannot claim tax relief on memberships or subscriptions paid to organisations that are not on the approved list, or ones you have not paid for yourself – for instance if your employer pays for them.
5. Marriage allowance
People who are married or are in civil partnerships may be able to claim marriage allowance.
HMRC says this “lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner” – potentially reducing the tax bill by up to £252 each tax year.
You can apply for the Marriage Allowance if you “do not pay Income Tax or your income is below your Personal Allowance (usually £12,570)” and your partner pays Income Tax at a basic rate (meaning their salary is generally between £12,571 and £50,270).
If you are eligible you can apply on the government website.
6. Claim tax back on pension contributions
HMRC says you can claim tax relief on private pension contributions worth up to 100 percent of your annual earnings.
How you can claim it varies as it depends on what kind of pension scheme you are in and your Income Tax rate.
If your employer takes workplace pension contributions out of your pay before deducting Income Tax or your pension provider claims tax relief from the government at the basic 20 percent rate and adds it to your pension pot, then you will get tax relief automatically.
Otherwise, if eligible, you can claim it from HMRC yourself.
7. Rent a Room Scheme
The Rent a Room Scheme allows people to earn up to £7,500 a year tax-free for “letting out furnished accommodation in your home” – although this is halved if you share the income with your partner or someone else.
This exemption is automatic unless you earn more than £7,500, in which case you are required to fill out a tax return.
There are some limitations. For example, you cannot rent out the room as an office and then make a claim.
8. Trading allowance
If you have a side hustle selling things online, then you can earn up to £1,000 per year on it tax-free – you could also make that much money tax-free by renting out your drive or a room in your house as an office.
Once you make more than this you need to inform HMRC.
HMRC states: “If your annual gross property income is £1,000 or less, from one or more property businesses you will not have to tell HMRC or declare this income on a tax return. You may be required to complete a tax return for other income.”
