Cut your 2019/20 tax bill

Will you be more generous to the taxman than you need to be in 2019/20? The personal allowance and higher rate income tax threshold are going up – which is good news, but the taxman is raking in extra billions of pounds through inheritance tax (IHT), National Insurance (NI) and capital gains tax (CGT) and plans to take even more in 2019/20.
You can’t afford to let him have more than necessary – and many of us do just that because we don’t make the full use of the available allowances.

Make the most of your pension

Your pension contributions attract tax relief. Most people have an annual pension allowance of £40,000 or their total earnings, whichever is lower, and non-earners have an allowance of £3,600.

So, the more you put into your pension, the less the taxman can take. Contributions to pensions attract tax relief at your highest marginal rate. If you contribute £16,000, the government will add £4,000 basic-rate tax relief to give you £20,000 in your pension. If you’re a 40% taxpayer, you can reclaim up to a further 20% tax relief through next January’s tax return, reducing your tax bill by up to £4,000, and if you pay 45% tax, you can reclaim up to a further 25% tax relief, reducing your actual tax bill by up to £5,000.

What’s more, you can contribute tax-efficiently to a pension on behalf of your spouse.

Use your ISA allowance

Your ISA allowance is £20,000 for the new tax year, and once it is in an ISA you will never have to pay tax on it.

If you don’t use it, you’ll lose it, so it’s worth putting away as much as you can even if you can’t afford the full sum.

If you are between 18-39, and especially if you are saving to buy a first property, you might want to put some of your allowance in a Lifetime ISA. You are able to invest a maximum of £4,000 into a Lifetime ISA per year. In addition to tax free growth, you get a 25% bonus on contributions, – so the maximum of £4,000 annual investment would mean a bonus of £1,000.

Use your spouse’s allowances

If one spouse pays no tax, and the other pays a basic rate, the marriage allowance lets the non-taxpayer transfer £1,190 of their personal allowance to their spouse – meaning they can earn more before paying tax.

There’s no sense letting one person in a couple pay tax on their savings or investments, particularly at a higher rate if the other pays nothing.

Investments that bring in an income, including shares, funds and buy-to-let property – can be passed between spouses.  Shifting savings and assets into an account in your partner’s name lets you make much more efficient use of your allowances.

Claim if you do other work

If you earn money in a self-employed capacity, deduct reasonable costs before you declare it. If you work from home you can claim some of your lighting, heating, cleaning, insurance, mortgage interest, council tax and other bills.
If you earn less than £1,000 a year in this way you will able to disregard it completely.

Check your tax code is correct

Every PAYE employee has a tax code. This shows the allowances and deductions used to calculate your tax bill – and they can be wrong. HMRC might assume that you receive private medical insurance, or you have a company car. The problem is that these things can change, and the taxman will not know about it – meaning that you will pay tax on benefits that you no longer have.

This might have you thinking – and there are many other ways to reduce your tax liabilities. To find out what might help you keep more of your money, it pays to talk to the Continuum experts.

Levels and basis of reliefs from taxation are subject to change and depend upon your personal circumstances.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

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