30 ways to save tax
- Which? tax advice to help save you money on your tax bill
- Income tax advice for employees, the self-employed and pensioners
- How to save on capital gains tax
- Tax and your children, tax and your partner and tax on your property
Tax codes, allowances and deadlines
1. Tax code
Check your tax code each year (the numbers and letters on your payslip). If you're on the wrong code, you may be paying too much tax. For more details use the Which? tax calculator to find out how much tax you should be paying.
2. Capital gains tax (CGT) allowance
Remember that capital gains in the 2015/16 tax year under £11,100 are tax-free. Married couples and civil partners who own assets jointly can claim a double allowance of £22,200. CGT is charged at 18% if you are a basic-rate (20%) taxpayer, and 28% if you pay tax at a higher rate (40% or 45%). For 2014-15, the tax-free allowance was £11,000 per person. For more details see Capital gains tax explained.
3. Tax return deadlines
Don’t miss the 31 October deadline if you want to make a paper tax return. You can do your tax online up to 31 January, but paper tax returns need to be in three months earlier than online tax returns to avoid a £100 fine. For more details see Tax returns.
4. Annual investment allowance
If you are a landlord or run your own business, take advantage of the annual investment allowance (AIA) to claim for capital expenditure on items such as tools and computers. Until 31 December 2015, you can claim relief on up to £500,000 a year. After this date, the limit will revert to £25,000.
How to pay less tax if you're self-employed
5. Tax-deductible expenses
If you're self-employed, don’t forget to claim all your tax-deductible expenses, including cash expenditure where eligible.
6. Self-employed car costs
If you're self employed, you can claim the running costs of a car, but not the cost of buying one. If you use the same car privately, you can claim a proportion of the total costs. See our page on tax allowances for the self-employed for more.
7. Cash-flow boost for self-employed
If you are setting up as self employed, you may be able to improve your cashflow by choosing an accounting year that ends early in the tax year. This maximises the delay between earning your profits and your final tax demand.
8. Annual losses
If you are self employed, you can carry forward losses from one year and offset them against profits from the next. See our page on when the self-employed pay tax for more.
9. Payments on account
If you are self-employed and expect to earn less in 2015/16 than you did the year before, apply to reduce any payments on account that HMRC ask you to make.
Saving tax on property income
10. Rent a room
Rent a room relief is an optional scheme that lets you receive up to £4,250 in rent each year from a lodger, tax-free. This only applies if you rent out furnished accommodation in your own home.
11. Landlord's energy-saving allowance
If you rent out property you can claim special tax allowance of up to £1,500 for insulation, draught proofing and installing a hot water system.
12. Landlord's expenses
If you rent out property, you can deduct a range of costs before declaring your taxable income. These include the wages of gardeners and cleaners, and letting agency fees.
13. Tax relief on your mortgage
You can claim tax relief on the interest on a mortgage you take out to buy a rental property – even if it the rental property is abroad.
14. Reduce capital gains tax (CGT) on a rental property
Landlords are normally liable for CGT when they sell a rental property. If it has been your main home at some time in the past, you can claim tax relief for the last eighteen months of ownership.
Pay less tax on savings and investments
15. Isa allowance
Use your tax-free Isa allowance. From 6 April 2015 the annual limit will be increased to £15,240. This can all be put in a cash Isa, all in a stocks and shares Isa or split between both cash and stocks and shares. See our guide to tax on savings and investments for more details.
16. No CGT on shares held in an Isa
There is no capital gains tax to pay when you sell shares or units held in an Isa. For more details see Tax on savings and investments.
17. Junior Isas
Use Junior Isas or Children’s Bonus Bonds to avoid being taxed on gifts you make to your own children.
18. Transfer assets
Transfer savings and investments to your husband, wife or civil partner if they pay a lower rate of tax than you do. See our guide to tax and your partner for more information.
19. Children's savings
Stop children being taxed at source on their savings by completing a simple form (R85) on their behalf.
Tax savings for older people
20. Age-related allowance
If you were born before 6 April 1938, you may be eligible for a slightly increased personal allowance and pay less income tax. See Tax in retirement.
21. National Insurance
Make sure you stop making National Insurance contributions if you carry on working beyond state retirement age (currently 62.5 for women and 65 for men).
22. Gift Aid
If you are over 65, making donations to charity through Gift Aid can reduce your taxable income to below the threshold at which you start to lose out on age-related allowances.
23. Tax relief on gifts
If you are in a higher tax bracket, you can claim back the difference between the basic and higher rate of income tax on any Gift Aid donations.
24. Inheritance tax
Lifetime gifts are not normally counted as part of your estate for inheritance tax purposes if you live for a further seven years after making them. Known as potentially exempt transfers (PETs) they can reduce your residual estate significantly.
Tax savings through employee benefits
25. Season ticket loan
If you are a commuter, check to see if your employer will give you a tax-free loan to buy your season ticket.
26. Pool cars
Use a pool car for occasional business travel, if your employer provides these.
27. Childcare schemes and tax credits
If you are an employee and pay for childcare, ask your employer if they have a childcare scheme. Salary sacrifice childcare schemes are easy to establish and can result in substantial savings for both employees and employers. For more details see working for an employer. Child tax credits can also save you money.
28. Company car?
If you are entitled to a company car, consider whether it would be more tax-efficient to take a cash equivalent in pay instead.
29. Going green
If you are changing your company car, consider a low-emissions model . These are now taxed at a lower percentage of their list price, than cars with a high CO2 rating.
30. Pay in to a pension scheme
Contributions to your employer's pension scheme (including any additional voluntary contributions you make) can be made from your gross pay, before any tax is charged.
Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Your home may be repossessed if you do not keep up repayments on your mortgage.