In the wake of the devastating impacts of the COVID-19 pandemic, society has been grappling with yet another significant challenge. Barely two years since the onset of the pandemic, the UK faces an official ‘cost of living crisis’. Understandably, these are times that test the resilience and fortitude of every citizen.
Taxation, admittedly, is rarely anyone’s preferred topic of conversation. More so, during these trying times, it can feel overwhelming. However, amidst this crisis, there’s an opportunity for you to make tax an ally rather than an adversary. Believe it or not, there are strategic measures you can take to turn tax laws and regulations to your advantage, reducing the strain on your wallet.
Presenting: 9 key UK tax saving strategies tailored for this cost of living crisis!
1. Diligently Review Your Tax Code:
An astonishing number of taxpayers find themselves unnecessarily parting with more of their hard-earned money because of discrepancies in their tax codes. Before the HMRC flags it, which could be a considerable time, proactively give them a call to confirm the accuracy of your code. Moreover, while the idea of underpaying taxes might seem tempting, it’s crucial to remember the eventual penalties can be financially crippling.
2. Explore Council Tax Savings:
With the sharp rise in council tax this year, seeking savings becomes vital. Two primary avenues for possible relief are: a) the Council Tax Reduction, and b) the Council Tax Rebate. The reduction varies based on multiple factors such as income, location, dependents, and residency status. The rebate, on the other hand, emerged as a direct response from the UK government to address the escalating living costs. There are specific conditions to qualify, including certain situations applicable to students, individuals with severe mental impairments, and those housing dependent relatives.
3. Seek Relief with Tax-Free Childcare:
The astronomical costs associated with childcare cannot be overstated. For daily nursery care for a child under two, you’re likely looking at a bill nearing £800 monthly. For households with multiple young children, the expenses amplify exponentially. Thankfully, relief measures are available which can provide up to £500 every three months for each child, with an increased amount for children with disabilities. Moreover, if your child is aged between 3 and 4, 30 hours of free childcare can make a substantial difference. Eligibility is contingent on factors like combined parental income, child’s age, and the childcare provider’s status.
4. Ensure You Haven’t Overpaid Taxes:
Receiving a notification about a tax refund can be a genuine mood lifter. Fluctuations in one’s employment status, like transitioning jobs or shifting to self-employment, can sometimes result in tax overpayments. Since HMRC might not always promptly rectify such oversights, proactively checking for possible rebates is a wise move.
Read Next: Overpaid Your Taxes? Here’s What to Expect
5. Leverage the Marriage Allowance:
Though not universally applicable, for eligible married couples or those in a civil partnership, the marriage allowance can translate to significant tax relief. The criteria for this include aspects related to age, income brackets, and the year of birth.
6. Benefit from the Starter Rate for Savings:
For those with an income below £17,570, there exists an opportunity to earn interest on savings up to £5,000 without attracting tax. The exact nuances can be understood better with a simple example: If you earn £12,000 annually, any interest on savings up to £5,000 remains tax-free.
7. Maximize Deductible Expenses if Self-Employed:
For self-employed individuals, tax deductions can offer considerable relief. Being savvy about what constitutes allowable expenses can result in notable reductions in your tax bill.
8. Tap into Company Benefits to Lower Taxable Income:
Many companies offer perks that employees might be unaware of. From tax-free season ticket loans to salary sacrifices for non-cash benefits, these can lead to reductions in taxable income. It’s also worth inquiring about bonus sacrifices, which can be channelled towards tax-efficient future savings.
Prioritize the Self Assessment Tax Return Deadline:
To avoid any penalties from HMRC, especially during the cost of living crisis, it’s crucial to respect the tax return deadlines. For the self-employed, this typically means the 31st of January for online filings and the 31st of October for paper-based submissions.
Lastly, for those seeking professional assistance, our team at Count can manage your tax return process for you. Additionally, for the self-employed among you, we’ve curated a comprehensive resource list to keep you updated on all crucial dates and milestones.