8 Ways to beat the taxman and save thousands

Harvey Jones

Nobody wants to pay more tax then they need to, but it can easily happen if you fail to plan ahead. Careful planning could save you hundreds or thousands of pounds a year. Here are some options.

1. Max your pension

You can cut your tax bill and also build a retirement nest egg by investing in a personal pension.

You can claim relief at 20, 40 or 45 per cent, depending on your tax bracket, and may also be able to “carry forward” any unused allowance from the previous three tax years.

Read more: Are you missing a pension boost?

 

2. Tax-free savings

You can save anything up to £20,000 in an ISA this year and all your interest and growth is free of tax for life.

You can put money in cash or stocks and shares, or a combination of the two. Parents and grandparents can also contribute to a Junior ISA. 

 

3. Lifetime opportunity

If you are aged between 18 and 40, you can claim free money from the government by contributing to a Lifetime ISA, or LISA.

You can pay in up to £4,000 a year to age 50 and receive a 25 per cent government-funded bonus on top, up to a maximum £1,000.

The money can be used as a deposit on your first home or taken without penalty after age 60 for retirement income. LISA contributions count towards your annual ISA £20,000 contribution limit but the bonus does not.

 

4. Spouse transfers

If you are married and your spouse is in a lower tax bracket, you could cut your tax bill by transferring assets such as property or non-Isa savings into their name.

This must be an outright gift with no conditions attached.

5. Marriage perks

If you are married or in a civil partnership, and one of you pays standard rate income tax while the other earns less than £11,500 a year, you may be eligible for the marriage allowance.

The higher earner can transfer up to 10 per cent of their personal allowance to their spouse, reducing their 2017/18 year’s tax liability by up to £230.

You can backdate claims to 5 April 2015, if eligible, saving a maximum £662. Two million couples may be missing out.

 

6. Capital gains tax

If you have made profits this year from, say, selling a property or shares held outside of an ISA, you might have to pay capital gains tax.

However, the CGT allowance allows you to bank up to £11,300 in 2017/18 or £11,700 in 2018/19 free of tax. Couples who share assets equally can use both their exemptions.

 

7. Inheritance tax

You can cut your family’s inheritance tax (IHT) liability by making gifts of up to £3,000 each tax year (£6,000 for couples), with the money instantly falling out of your estate.

You can gift another £3,000 if you did not use last year's allowance or £6,000 for couples.

You can also make smaller gifts of up to £250, provided the recipient hasn't benefited from other IHT breaks.

 

8. Charitable donations

If you donate through Gift Aid your chosen charity can claim an extra 25p for every £1 you give, while 40 per cent taxpayers can also claim tax relief worth £25 on a £100 donation.

This even applies if, say, you sponsored a friend to run for charity.

Read more: How to save by giving to charity