How To Cut Your Tax Bill In 2018
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The list of tax exemptions available differs from person to person but here’s 5 that people often don’t know about.
- Marriage Tax Allowance
Marriage Allowance enables you to transfer up to £1,150 of your personal tax allowance to your higher-earning wife, husband or civil partner. This will reduce their tax by up to £230 in a tax year (6 April to 5 April).
To benefit as a couple, you (as the lower earner) must have an income of £11,500 or less and your partner must earn between £11,501 and £45,000 (£43,000 in Scotland).
- Personal Savings Allowance (PSA)
The PSA enables basic-rate taxpayers (earning £11,500-£45,000) to generate £1,000 interest on their cash savings per year tax-free. Higher rate tax payers (earning £45,000-£150,000) get a £500 allowance, and additional rate tax payers (£150,000+) don't get an allowance.
- Capital Gains Exemption
Capital gains tax is payable on the gain made on any asset worth more than £6,000 when you come to sell it. This excludes a few asset types such as your primary residence, cars and lottery wins.
Each individual has a CGT exemption of £11,300 per tax year so it is important to factor this in to deciding when to sell something. It’s also worth bearing in mind that married couples each have a £11,300 allowance, so £22,600 total.
- Pension Advice Vouchers
In November 2017 the government passed a new act which enables employees to claim the tax back on up to £500 of financial advice relating to their pension.
This is done through salary sacrifice so your employer will reduce your (taxed) salary by £500 in exchange for a (tax-free) £500 payment. The amount of the saving depends on your tax band but can be as high as £310 per person.
To qualify you need to be employed and have received or be planning to receive financial advice relating to your pension in this tax year. You can find more information at the Pension Advice Vouchers website and claim a tax rebate today if you qualify.
- Dividend Tax Allowance
In the tax year ending 5th April 2018, investors in any companies (including company directors and business owners ) can receive up to £5,000 of dividend income tax-free. This equates to £10,000 per couple.
There are plans to reduce this to £2,000 effective from April 2018.
These are just some of the ways that tax allowances can help people save £1000s in tax each year, but there are many more. An accountant can help ensure that your tax bill is as low as is (legally!) possible. If you’d like some accountant quotes and a no obligation chat on how an expert could help you, request your accountant quotes today.