About Us




13 easy ways to cut thousands from your tax bill

by | Aug 3, 2021

From salary sacrifice, to "carrying back" and inheritance tax loopholes, Mike Warburton (Tax Hacks) reveals his favourite ways to pay less tax…
  1. Check your tax code. HMRC can only set a code number based on what they are told, essentially by you and your employer. Mistakes happen so don’t just file your coding notice in the bin.
  2. You do not have to earn to obtain tax relief on pension contributions. If you pay £2,880 a year into a pension scheme HMRC will add a further £720 regardless of your income. This operates well for non-working spouses.
  3. Consider a “salary sacrifice” with your employer making further pension contributions instead. This can save National Insurance for both you and your employer. I did this for a few years ahead of my retirement and my employer added their saving to my salary.
  4. You will know that there is a £1,000 allowance for income generated by savings, but did you realise the allowance can be as much as £6,000? If your other income does not exceed your personal allowance, the first £5,000 of interest income above your savings allowance is taxed at 0%.
  5. Gift aid payments give relief at your top tax rate, but have you considered the “carry back” provisions? Provided the election to carry back is made before the normal filing date (31 January if filing online) the payment can be treated as made in the previous year when your tax rate may have been higher. It must, however, be entered in the first tax return you file, not an amendment and please make sure that all gift aid payment is made by the spouse paying tax.
  6. You are not liable to make National Insurance Contributions after you reach your state pension retirement age, neither are you liable if your earnings are below the primary threshold of £184 per week. But you still qualify for the state pension and related benefits if you earn above the lower earnings limit of £120 per week. Remember that you need contributions for 35 qualifying years for a full state pension so consider making “voluntary class 3” contributions if you think you will fall short and consider buying missing years.
  7. If you have children under 16, or under 20 in approved education or training, make sure to register for child benefit. If one of the households has income above £50,000 a year it will begin to be clawed back, but it should still worth registering so that you continue to qualify for the state pension.
  8. Don’t forget the marriage allowance which can allow you to transfer £1,260 of your personal allowance to your spouse or civil partner with a saving of £252 provided they are a basic-rate taxpayer and you do not pay tax, or vice versa. You can backdate an election to any year since 5 April 2017.
  9. We all have a capital gains tax annual allowance of £12,300 from the day we are born. Consider transferring shares or unit trusts to your spouse or civil partner before they are sold so that their allowance is not wasted. If you want to use up your annual allowance but keep the shares in the family you can sell them in the market and your spouse can buy them back, known as “bed and spouse” which gets round the normal “bed and breakfast” rule for shares bought back within 30 days.
  10. If, like many, you have been working from home in the pandemic, don’t forget that you can claim working from home allowance of the actual additional costs or £6 per week without further evidence. This applies for 2020-21 as well as this tax year.
  11. Why not get a bit extra by letting a spare room to a lodger? Under rent a room relief the first £7,500 income is tax free, and it should not affect your CGT position on eventual sale. In addition, if you let your home out on Airbnb the first £1,000 should escape tax through the rental allowance.
  12. Have you thought about selling off some of your surplus items on eBay? This is not caught for income tax unless you have been buying goods with the intention of selling them on at a profit. Even then, the first £1,000 of profit may be covered by the annual trading allowance.
  13. If you are concerned about inheritance tax, remember that apart from the £3,000 annual allowance and seven-year lifetime gift rule you can make payments of any amount free of IHT if they are regular, out of surplus income, and do not reduce your standard of living. On top of that there are no limits on the amount you can pay to maintain your children up the age of 18 or until they cease full time education or training.

An article in the Daily Telegraph by Tax Hack columnist Mike Warburton – previously a tax director with accountants Grant Thornton


Get top tips and insights, straight to your inbox.

Sign up to our helpfully unintrusive newsletter and get events, news, and insightful views straight from our experts.

Share This