Check your tax code, use tax-free allowances, and other strategies to pay less tax.
Tax savings
Tax savings
Whether you’re an employee, self-employed, landlord, investor, or retiree, you can legitimately lower your tax payment.
We explain how simple checks can raise your take-home pay with no effort, as well as tax breaks and government programmes.
Here are 35 basic tax ideas to help you save money.
Get jargon-free money-saving suggestions and submit your return to HMRC.
Tax cuts
Let’s start with five simple tax-saving strategies.
1. Tax code
Your tax code determines how much HMRC takes from your paycheck. Payslips have it.
Each year or after a job change, check your tax code for accuracy. Our tax code guide lists the most common.
If you’re on the wrong code, you may owe less tax or get a refund for previous years.
2. Tax credits
Tax credits help low-income caregivers, disabled employees, and others.
Working and child tax credits are the primary types.
Universal Credit recipients can’t claim tax credits.
3. Make pension contributions
You can contribute to your employer’s pension programme from your gross pay, before taxes.
The government will tax-relief your pension, providing you a free bonus for saving. Our pension tax calculator might help you save money.
4. Marital allowance
Marital allowance
Marriage allowance helps couples if one partner earns less than the personal allowance.
In a marriage or civil partnership, you can transfer unused personal allowance to the higher earner.
Transferring up to £1,260 in 2022-23 might save you £250.
Higher earner must be basic-rate taxpayer.
5. File taxes on time
File taxes
If you’re one of 12m people who must file a self-assessment tax return, don’t miss the deadline. It’s a costly and readily avoidable mistake.
Online returns for 2021-22 are due 31 January 2023. Paper filings must be submitted by October 31, 2022.
Even if you owe no tax, missing the deadline will cost you £100.
6. Recoup overpayments
If you’re a non-taxpayer or your income unexpectedly drops during the year, HMRC thinks you utilise your personal allowance equally each month.
Fill out HMRC form R40 to claim.
7.Tax breaks
Season ticket loans
Some businesses offer tax-free loans to buy season tickets, saving you hundreds. Check if your workplace participates.
8.Tax-free childcare
You can claim 25% of your childcare expenditures, up to £500 every quarter, under the tax-free childcare plan. You must have a child under 11 and make less than £100k.
9.Get a business car.
Consider whether a cash equivalent to a business automobile would be more tax-efficient.
10. Buy a low-emission vehicle
Consider a low-emissions car for your firm. Now taxed at a lower proportion of list price than high-CO2 automobiles.
Tax savings
11. Maximize your PFSA
Basic-rate taxpayers can earn £1,000 tax-free interest in 2022-23. Higher-rate taxpayers get £500 tax-free.
Only income above this amount is taxable.
The savings provider won’t deduct this automatically.
Self-assessment or PAYE must be used to pay tax.
Additional-rate (45%) taxpayers don’t get a savings allowance.
12. Maximize your Isa
Everyone can use their Isa allowance. For 2022-23, you can put £20,000 in Isas. 2021-22 is unaltered.
This can go in a cash Isa, a stocks and shares Isa, or both. Our guide to savings and investments explains how this works.
13. Save with introductory rate
If your income from a job or pension is below £12,570 in 2022-23, you may qualify for the beginning savings allowance.
Tax-free interest up to £5,000 In addition to your personal savings allowance, you might earn $18,570 before taxes.
Self-employed pay less tax
Self-employed people get tax benefits. not duplicate Check HMRC’s definition of self-employed.
14. Tax-deductibles
Business expenses can be deducted from profits, reducing tax. This includes gas, phone, and home office bills.
Discover tax-deductible expenses in our guide.
15.Self-employed car costs
You can claim the operating costs of a company automobile, but not its purchase price. If you use your work automobile for personal use, you can deduct some of the expenditures.
Add up your motor expenses for the year and figure out the percentage of business miles you drove, or claim a set rate mileage allowance for business trips.
16.Self-employed cash-flow boost
As a business owner, you can determine when your accounting year ends.
If you choose an earlier accounting year-end date, you’ll have extra time to pay taxes. As your profits climb, so will your tax bill. More time means fewer late tax payments.
17. Profits
You can offset a loss from one year against profits from another. This reduces taxes.
Learn more in our self-employed tax guide.
18. Charges
Self-employed people pay tax in January and July. You’ll pay last year’s tax bill.
If you expect to earn less in 2022-23, you can cut your account payments. HMRC requires form SA303 online or by mail.
19.Dividend allowance
A fixed amount of dividend income is tax-free each year.
This was cut on 6 April 2018, although you can still earn up to £2,000 in dividends tax-free.
Dividend tax guide has more info.
20.CGT allowance
Capital gains are profits from selling second houses, art, antiques, and shares.
2022-23 tax-free capital gains of £12,300. Couples who jointly own assets might get £24,600.
Remember, unused allowances are lost forever. You can’t combine years’ tax-free allowances.
This graphic shows basic-rate and higher-rate capital gains tax rates.
See our guide on CGT allowances and rates for more information.
21.No CGT on ISA shares
Selling Isa shares or units is tax-free.
We explain tax on savings and investments in our guide.
22. Give spouse assets
Transferring assets to a spouse or civil partner is tax-free, and a lower-earning spouse may pay lower income tax rates.
If your spouse or civil partner pays less tax than you, transfer savings and investments to them.
23.Isas Junior
When giving to your own children, pay into a junior Isa to avoid tax on the interest.
2022-23 Junior Isa allowance: £9,000.
24. Invest in capital-building
Higher- and additional-rate taxpayers may be able to lower their tax payment by moving to capital-growth assets.
You may benefit from lower tax rates and the annual capital gains allowance (£12,300 in 2022-23) Higher-rate taxpayers pay 20% on capital gains and 33.75 on dividends.
25.Invest in EIS
To stimulate early-stage firm investments, the government grants tax breaks.
You can deduct 30% of your investment in an eligible firm through crowdfunding services like CrowdCube or Seedrs. £1 million can be invested per year, saving up to £300,000 in income tax.
Equity crowdfunding is explained in our guide.
– crowdfunding guidance.
26. Use VCTs
VCTs give 30% tax benefit on investments up to £200,000. VCTs are a sort of investment trust with professionally managed investments.
To qualify, you must buy shares at launch and hold them for five years.
27.Buy company shares
If your employer gives free or discounted shares through a government-approved plan, such as the ShareIncentive Plan, Company Share Option Plan, or Enterprise Management Initiative Scheme, the value of the shares is excluded from income tax and National Insurance.
Taxes apply. When you sell your shares, you’ll owe capital gains tax.
28.Use Rent-a-Room relief to reduce property tax.
The Rent-a-Room initiative lets you receive up to £7,500 in lodger rent tax-free. This only applies if you rent out furnished space in your own house and live there.
Shared property owners can only claim £3,750 each.
The number of homeowners reduces this.
29.Landlord costs
You can deduct rental charges from your taxable income.
Gardeners’ and cleaners’ pay, letting-agency costs, ground rentals and service charges, accountant’s fees, and landlord insurance. Learn more in our guide to landlord expenses and allowances.
30. Replaced household items
Landlords can get tax breaks for replacing “domestic objects” in furnished rentals.
Beds, rugs, dishes, cutlery, sofas, curtains, fridges, and other white goods qualify for relief.
This only applies to replacements, not new purchases. Only a like-for-like replacement is covered.
31.Buy-to-let mortgage tax relief
You can claim a 20% tax credit on mortgage interest when you acquire a rental property.
Our guide to mortgage interest tax relief has more information.
32.Reduce rental property CGT
Landlords must pay capital gains tax when selling a rental property.
If the property was once your principal home, you can claim tax relief for the final nine months.
Our guide on property capital gains tax explains the rules.
Senior tax breaks
33.Insurance
Insurance
Working past state retirement age will end your NI contributions (currently 66).
Ensure that your employer changes your remuneration.
More:
34.NI and pension
Gifts can reduce inheritance tax bills.
If you live seven years after making a gift, it’s not subject to inheritance tax.
Potentially exempt transfers (PETs) can minimise your bill.
You can give up to £3,000 a year tax-free, as well as many smaller donations of £250, as long as they don’t go to the same person.
Our gift inheritance tax guide has more details.
Savings for charities
35.Donate .
Tax-free charitable gifts. Gift Aid lets you or the charity recoup taxes. Higher-rate taxpayers can claim the difference to the basic rate on Gift Aid gifts.
To do so, file a self-assessment tax return or contact HMRC to change your tax code.
A £1.25 donation costs a basic-rate taxpayer £1. High-rate taxpayers pay 75p. Donate date and amount.
