Best Ways to Save Money on Taxes in the UK
Navigating the labyrinthine world of UK taxes can be daunting, but with a few strategic moves, you can significantly reduce your tax burden. At Business List, we're dedicated to providing you with the most comprehensive and insightful business information. Here's your guide to saving money on taxes in the UK, infused with practical advice and real-world examples.
Utilise Your Personal Allowance
The personal allowance is the amount of income you can earn each year without paying any tax. As of the current tax year, this is set at £12,570. Make sure you fully utilise this allowance. For instance, if you have a spouse or partner, consider transferring some of your earnings to them if they fall under a lower tax band. This simple act can lead to considerable tax savings.
Claim All Available Tax Reliefs
Pension Contributions
Contributing to your pension is one of the most efficient ways to save on taxes. Not only do you secure your future, but you also receive tax relief on your contributions. For every £80 you pay into your pension, you get £20 tax relief from the government, effectively boosting your retirement savings.
Charitable Donations
Donating to charity is another excellent way to reduce your tax bill. Under the Gift Aid scheme, charities can claim an extra 25p for every £1 you donate, and higher-rate taxpayers can claim the difference between the higher rate of tax and the basic rate on their donation.
Invest in Tax-Efficient Accounts
ISAs (Individual Savings Accounts)
ISAs are a great way to save money without paying tax on interest earned. You can save up to £20,000 per year in an ISA without paying any tax on the interest or profits. This can be a significant saving over time.
Dividend Allowance
If you invest in shares, make sure you take advantage of the dividend allowance. You can earn up to £2,000 in dividends each year without paying any tax. This is particularly beneficial for small business owners who can pay themselves in dividends rather than a salary.
Useful Information Table
Key Allowances and Tax Reliefs
| Allowance/Relief Type |
Amount |
| Personal Allowance |
£12,570 |
Annual tax-free income |
| Pension Contributions |
Tax relief on contributions |
Boosts retirement savings |
| Gift Aid |
25% added to donations |
For charitable donations |
| ISA Limit |
£20,000 |
Tax-free interest/profits |
| Dividend Allowance |
£2,000 |
Tax-free dividends |
By carefully planning your finances and taking advantage of the allowances and reliefs available, you can make a significant dent in your tax bill. Remember, tax planning is an ongoing process, and it's essential to stay informed about changes in tax legislation to maximise your savings. At Business List, we're committed to providing you with the latest and most relevant business insights to help you achieve your financial goals.
