‘Efficient way to reduce your tax bill’ – Britons urged to act as new tax year begins
Martin Lewis offers advice on council tax rebates
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
With the tax year just beginning, now might be great time for people to get their finances in order, and ensure they are making use of all the tax breaks available to them. James Norton, head of financial planners at Vanguard spoke exclusively to Express.co.uk about the different ways that Britons can save on tax this year.
Capital Gains tax (CGT)
Mr Norton explained that at present, every Briton has an annual allowance of £12,300 on the capital gains they might be lucky enough to realise on any investments that they sell.
Below this level there is no CGT to pay. However, by sheltering investments in an individual savings account (ISA), people can circumvent CGT altogether.
He said: “The amount you can tuck away in an ISA is set at £20,000 per year per adult, and it also shelters you from any income tax on the interest or dividends that you may earn, respectively, from your bond and stock market investments.
“Remember, each individual has their own allowance, so a married couple can potentially realise gains of £24,600 this tax year without incurring any tax.
“In most cases, you can also transfer assets between spouses and civil partners tax-free, so it might make sense to consider transferring holdings to a spouse in a lower tax bracket or one who hasn’t used their allowance.”
To encourage people to save for their retirement, the Government offers tax relief on pensions, including self-invested personal pensions (SIPPs).
Mr Norton explained that at this time people can pay 100 percent of their annual gross earnings up to a maximum of £40,000 into a pension and get the tax originally deducted from their salary paid back to them.
He added: “If you’re a basic rate taxpayer, this money is added automatically to your pension – in this way, £32,000 invested in your pension can become £40,000. If you’re a higher-rate taxpayer, you can claim the remainder back through your annual self-assessment.”
National Insurance is going up by 1.25 percentage points, at a time when the cost of living is rising.
It means that everything you earn over the tax-free threshold was being taxed at 12 percent and will now be taxed at 13.25 percent.
If someone is earning £27,000 a year, they will end up paying around £2,053 in National Insurance annually.
This will now go up by over £200.
Across the whole economy, this amounts to an £11billionn tax increase for the Government.
Mr Norton said: “The gifting allowance is an efficient way to reduce your tax bill when looking at inheritance tax (IHT).
“Everyone can gift up to £3,000 each tax year, to reduce their estate, without it having any other potential tax consequences for IHT.
“Your unused allowance can be carried forward for one tax year. In addition you can give as many gifts of up to £250 to as many individuals as you want.”
Taxpayers are being called to find new ways to save money as inheritance tax (IHT) receipts continue to rise.
Recent IHT statistics revealed that tax receipts reached a record high of £5.36billion for the period between April 2021 and February 2022.
This is a notable increase of £700million from the amount recorded by HM Revenue and Customs HMRC the same time last year.
Currently, the IHT threshold remains frozen at £325,000, the value of many estates has only grown in value.
As a result more families are being pushed into paying inheritance tax and experts worry that many continue into the new tax year.
He reminded Britons that if they have any doubts or questions about their finances, or they’re not sure where to start, they should consider talking to a financial adviser.
Source: Read Full Article