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The simple fact is that not everyone is aware that they are entitled to a certain amount of allowances or benefits, and that there are systems in place to help those with low income or large debts from paying too much tax. The following five tips tell you how to save money on Income tax and other taxes.
Verify Your Tax Code
It can be tempting to just 'let tax happen', but if you are registered under the wrong tax code you could be paying more tax than you should. Don't count on the authorities to notice, an unspotted error could mean you're overpaying for years. Tax codes like"36K" or "40L" mean very little to the layman, but check your documents to make sure your code is correct.
Personal and Married Allowances
Most UK taxpayers are allowed a certain level of tax-free earnings. The level is dependent on your age and total income. If you have an asset that generates income, it can be beneficial to transfer that asset to a basic rate or non-tax payer, or the assets can be shared equally to make full use of both personal allowances. If you are married, this kind of transfer is often free of capital gains tax too.
Claim What is Yours
If you've recently stopped working, regardless of the reason, you might be entitled to claim some of your income tax back. If you don't pay tax, you can register to get interest gross or tax back.
If you've just stopped working for whatever reason, you may be able to claim back some of the income tax you have paid. You may also benefit from the 10% savings tax rate.
ISAs and Other Tax Efficient Savings
This tax year, you can put up to £5,640 into an Individual Savings Account, where it will earn tax-free interest every year until you withdraw it. If you have stocks and shares worth up to £11,280 you could also move them to a tax-free ISA. Contributions towards your pension are also tax-free.
This is where the taxman nets his biggest haul with many estates paying sizeable death duties that could easily have been avoided with a bit of forward planning. Make a will and make sure both spouses use their Inheritance tax-free allowance. You can also take advantage of your tax-free gift allowance while you are still with us. More information on this is available on the HMRC website.