10 ways to cut your tax

1. Share investments

“Married couples and civil partners should ensure they each hold assets that generate income in the right way,” says Jaskarn Pawar at Investor Profile. “So if one of you pays basic-rate tax and the other is not using all of their personal tax-free allowance, they can move some assets to ensure that allowance is being used.” Check your latest tax coding notice from HMRC.

2. Maximise age-related allowances

Most people are allowed to receive a certain amount of income in a tax year before tax is payable. If you were born 6th April 1938 to 5th April 1948 you may be able to take advantage of increased tax-free allowances. “As long as the individual’s income is £27,000 or under, the allowance becomes £10,500, rather than the £10,000 available to younger people,” says Danny Cox at Hargreaves Lansdown.

3. Use your ISA allowance

Get better returns and pay less tax on your savings with an Individual Savings Account. “You can invest up to £15,000 per tax year and this can be split between cash, and stocks and shares in any proportion,” says Danny Cox. For cash ISA rates, check national newspapers or

4. Get tax-free interest on savings

If your income is below your personal allowance, then you are a non-taxpayer. This means you are entitled to receive interest on your savings without having tax withheld (as usually happens). If this applies to you, ask your bank or building society for form R85. You can also claim back tax you have paid unnecessarily on your savings interest in previous years using form R40. For help and guidance and to download the relevant forms, click here.

5. Drive down road tax

The price of road tax increases with the car’s official CO2 emissions, so it pays to get a smaller, more economical car, says The AA. New cars emitting less than 100g/km are exempt from road tax including Toyota iQ 1.0 and Smart Fortwo Passion Cabrio CDI. You can find out more at www.gov.uk/calculate-vehicle-tax-rates.

6. Switch to tax-free savings

Once your ISA allowance is used, transfer money from a standard savings account into NS&I tax-free savings certificates when they’re available. “Fixed-interest savings certificates and index-linked savings certificates aren’t currently on sale, but existing holders are able to renew their investment at maturity,” says Danny Cox.

“And while the current average prize pool of 1.35 per cent on NS&I Premium Bonds isn’t that attractive, it is tax-free with the potential of winning £1million.  Call NS&I on 0500 007 007 or visit www.nsandi.com.

7. Give to family members

The taxman will take 40 per cent of your estate above £325,000 when you die. One way to avoid Inheritance Tax (IHT) is to give surplus income via gifts to family members before you die. “Gifts have to be from income, with an established regular pattern. Grandparents often use this to pay school or university fees,” says Joss Harwood, Eldon Financial Planning.

8. Take advantage of Gift Aid

Higher-rate taxpayers should keep a record of all charitable donations and ensure they claim Gift Aid where appropriate. “This boosts the value of their donation to the charity by 25 per cent, which is worthwhile on its own but also allows higher-rate taxpayers to reduce their income tax bill by up to 25 per cent of the donation, so gifting £500 over the year would give the charities £625 and reduce your tax bill by £125,” says Scott Gallacher of Rowley Turton. Find out more at

9. Drawing a pension

If you are aged 55 or over and have a personal pension from which you haven’t taken any benefits, you can take up to 25 per cent as a tax-free lump sum. “This helps income tax in the short term, or you can spread taking this over a number of years to help save tax in the longer term.

From April 2015 all pensions can be useful for inheritance tax (IHT) planning as they will all sit outside your estate for IHT purposes,” says Danny Cox.

10. Get tax help

Find a specialised tax adviser and review or draw up a will with the help of a solicitor who has additional tax qualifications. Tax Help for Older People offers free tax advice to people aged 60 and over on incomes below £17,000. Call 0845 601 3321 or visit www.taxvol.org.uk.


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