There are several ways to save taxes in the UK
There are some ways you can save taxes in the UK. You have to save money in some pension plans which are tax-free and transferable.
If your employer gives you a company car, it will be taxable since it’s a perk of the job. But you can ask for the car to be replaced by a salary sacrifice arrangement for a cash equivalent amount or other benefits such as private healthcare or gym membership. You can use the tax rebate calculator to estimate your taxes.
Help you to save your money
If you’re a resident of the UK, there are significant ways that you can save your hard-earned money. Some methods will work better than others, and some may not be feasible at all given your income bracket or lifestyle. Below are some options that may help you to save money in the UK:
- Tax-free ISA
- Life insurance
- Childcare vouchers
- Giving to charity
- Cycle to work scheme
- Marriage allowance
- Gift to charity
- Healthcare scheme
What Are Ways To Save On Taxes In Uk?
There are various tax-saving options available in the UK as many of them are valid for taxes on salary.
The tax saving on salary is known as salary sacrifice. The best example of the same is if you are paying for a private school for your child, then this amount can be deducted from the salary before calculating your income tax. However, not many employers allow this benefit and would require approval from them before availing it.
Under Construction Industry Scheme (CIS), every self-employed contractor or subcontractor gets to deduct 20% of their earnings under gross payment status. This will reduce their taxable profits and provide them with more take-home pay, which is why it’s one of the most popular ways to save taxes in the UK.
Make an Individual Savings Account (ISA)
- Make an Individual Savings Account (ISA). This allows you to earn tax-free interest on savings.
- Remember that an ISA is not the same as a savings account, which has a guaranteed rate of return but pays the taxed interest.
- When a government wishes to provide incentives for certain behaviour it offers individuals or enterprises a reduction or exemption from taxes on their income, profits, inheritance, etc., as an incentive to take up such behaviours.
See whether you could be exempt from paying income tax
Check your tax code
Checking your tax code is one of the first things you should do to see whether you are paying too much income tax. HMRC uses a series of letters and numbers to calculate how much income tax you have to pay, without it, each week or month, your employer would need to deduct the basic rate on everything you earn. Your tax code should be written on your payslip or P60.
Check if you are eligible for a marriage allowance?
A marriage allowance lets somebody transfer 10% of their allowance (the amount they can earn before paying tax) to their husband, wife or civil partner – if their income is less than the personal allowance. A married couple could save up to £230 in income tax in 2015-16 by transferring some of their personal allowances from the lower earner to the higher earner.
Eg: If one spouse earns £15,000 and the other doesn’t work at all then that spouse can transfer part of their personal allowance (£7,500) over reducing their partner’s liability by £750
If you’re working and single, see if you’re entitled to a tax rebate
Consider an Employee Ownership Trust scheme
An Employee Ownership Trust is an ideal way for a company to save on its statutory tax bill.
In essence, this scheme allows the employer to create shares in a trust, which are then distributed to employees. The employee retains full control of the shares and can sell them back to the company anytime. They are also entitled to all of their original share entitlements (including any dividends) and can choose whether or not to pay income tax on them.
Several ways exist in the UK to reduce taxes
There are several ways to lower taxes in the UK. It is important to be aware of all the options available to you so that you can make a decision about which methods will be most beneficial for your circumstances.