Tax and allowances for older people Reducing your tax exposure

If you're missing out on age-related allowances because your total income is above the upper limits, there are a number of ways you can reduce the amount you are assessed on for tax. 

This may result in you qualifying for age-related allowance after all:

Choose tax-free 

Use your yearly Isa allowance and consider tax-free National Savings & Investments savings certificates. Tax-free savings income earned in this way does not count towards your total taxable income.

Invest for capital gains rather than income 

Choose growth funds as opposed to income funds.

Pay more into a pension 

You could continue to pay into a pension plan (up until age 75) and the money you pay in, as well as qualifying for tax relief, would be deducted from your income when working out your allowances.

Defer your income 

Consider putting off claiming your state pension if you don't need it. This reduces your taxable income now and will boost your state pension when you eventually decide to claim it – or you can opt for a (taxable) lump sum instead of increased pension. 

When you receive the lump sum, it does not count towards your income for the purpose of working out age allowance for that year.

Donate 

Make donations to charity through Gift Aid or payroll giving. A donation made now and carried back to last year will reduce your total income for 2010-11.

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