Blog     06 Jul 2016   6,874

14 Ways to Save Tax

Today, we share 14 useful ways to save tax on your income. Some are really straight forward and others need more time to understand exactly how they work. Plus, we tell you a bit about a new method that’s spreading like wildfire as it’s helping everyone unlock £6,000 tax-free per year.

Pay less tax on savings and investments

1. Isa allowance

Use your tax-free Isa allowance. From 6 April 2016 the annual limit will stay at £15,240, the same as it was for 2015. 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.

2. No Capital Gains Tax (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.

3. Junior Isas

Use Junior Isas or Children’s Bonus Bonds to avoid being taxed on gifts you make to your own children. 

4. 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 Which? guide to tax and your partner for more information.

5. Dividend allowance

From 6 April 2016, the first £5,000 you receive in dividends from investments is tax-free. Basic rate taxpayers will pay 7.5% tax on dividends they receive above the threshold however. Higher rate taxpayers pay 32.5% and additional rate taxpayers 38.1%. 

6. Personal savings allowance

From 6 April 2016, the first £1,000 of interest you receive from savings is tax-free, if you are a basic rate taxpayer. If you are a higher-rate taxpayer, the threshold is £500. It is only if your savings income exceeds the allowance that any tax is due on it. This will no longer be deducted at source, if tax is due you can pay it via self-assessment or have it deducted via PAYE through an adjustment in your tax code.

Saving Tax on Property Income

7. Rent a room

Rent a room relief is an optional scheme that lets you receive up to £7,500 (increased 6 April 2016, from previous limit of 4,250) in rent each year from a lodger, tax-free. This only applies if you rent out furnished accommodation in your own home.

8. 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.

9.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. This relief will be reduced from April 2017 onwards. 

10.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.

Tax Savings for Older People

11. National Insurance 

Make sure you stop making National Insurance contributions if you carry on working beyond state retirement age (currently 63 for women and 65 for men).

12. Gift Aid

Making donations to charity through Gift Aid can reduce your taxable income. 

13. 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.

14. 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.

The Secret to Earning £6,000 Tax-free Per year 

There are some useful ways to save tax, yet there weren’t many proven methods to earn a significant income that’s completely tax-free – until now. Now you can join Profit Squirrel, an online membership that allows everyone in the UK over the age of 18 to earn £500+ every single month. It’s becoming a really great way for people to earn a second income that’s always going to be tax-free. If you’re keen to find out more, join Profit Squirrel for free and earn £30 guaranteed just so you learn how to make this into a permanent second income. If you join directly as a premium member and don’t make a profit with Profit Squirrel you’re guaranteed money-back plus £500 cash! Join for free.


Jason Robertson

Jason Robertson

Community support member

I dedicate my spare time to making Matches so I can spoil my 3 little angels. A teacher from Merseyside, love cooking and reading. Liverpool's #1 fan!

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