Little-known loopholes that’ll cut your tax bill ( and they’re all legal! )

WE PAI d around £500 billion in personal taxes last year.

While super-rich celebrities and footballers can afford to pay top accountants to find tax efficient ways of saving them money on their income, the rest of us must find simpler ways to cut our tax burdens. We’ve rounded up a few you could try.

PUT SAVINGS IN YOUR SPOUSE’S NAME

COUPLES can make better use of tax allowances by sharing or switching savings.

We each have a tax-free personal income tax allowance of £11,500 (rising to £11,850 from April 6). The basic rate of 20 pc is then charged until our income breaches £45,000 (£46,350 from April 6) in most of the UK or £44,273 in Scotland.

Above this, 40 pc is charged, and above £ 150,000, 45 pc. once taxable income breaches £100,000 the personal allowance is gradually taken away. So couples who pay different tax rates could move assets into the name of the person on the lower rate.

Basic rate taxpayers can also receive £1,000 of interest from savings, while higher rate taxpayers have a lower £500 limit.

We can also receive £5,000 from share dividends tax-free each year. Above this, dividends are taxed at 7.5 pc for basic rate taxpayers and 32.5 pc for higher rate payers.

SHARE YOUR TAX-FREE ALLOWANCE

You could cut your tax bill by up to £ 230 if one partner in a marriage or civil partnership is a basic rate taxpayer and the other a non-taxpayer. This means one must have a taxable income of less than £11,501 a year and the other between £ 11,501 and £45,000 (or £43,000 in Scotland).

The non-taxpayer can apply to have up to £1,150 of their personal allowance transferred to the taxpayer thus boosting the income of the higher earner.

If one of you was born on or before April 5, 1935 you may be better off applying for the married couples’ allowance instead. You cannot have both.

CLAIM EXPENSES FOR YOUR WORK

BRITAIN’S army of nearly five million self-employed must take care of their own welfare and pensions, but can claim tax relief on business expenses.

For every £500 of expenses a basic rate taxpayer reduces their tax bill by up £100 and a higher rate taxpayer by up to £200 — so keep all your receipts.

Expenses could include your home phone bill, petrol, bicycle if you use it for work, pension contributions, uniforms, stationery and other work materials.

USE ISA TO BEAT DEATH TAX

WITH interest rates expected to rise tax-free Isas should be back on your radar. You can invest up to £20,000 into an Isa this tax year — April 6 to April 5 — and benefit from tax-free growth.

one of the lesser-known perks is that they can be passed intact to a spouse or civil partner when you die. So even if each of you individually does not receive enough income from savings to pay tax, it is worth considering what may happen when you die.

HELP CHILDREN TO BUY A HOME

GIVING money away to children and grandchildren now could mean they pay less tax on anything you leave them when you die.

If you live for seven years after making the gift it falls outside of your estate. If you die before this it counts towards your nil rate band, which is the £325,000 taxfree allowance everyone has.

Married couples and civil partners can combine this for a joint £650,000.

A main residence allowance can boost the tax-free limit for a married couple or legal civil partners leaving money to direct descendants, such as children and grandchildren, to £850,000 now and £900,000 from April 6.

Inheritance tax is charged at 40 pc on assets above these limits when you die. There’s also a £3,000 gift allowance, which can be carried back 12 months, so if you didn’t give away money in the last tax year you could give £6,000 now. on top of this there is a wedding gift allowance of £5,000 for parents and £ 2,500 for grandparents plus a small gifts allowance of £250.

GET RELIEF ON PENSION SAVING

PENSIONS are the ultimate tax shelters. If you’re a basic rate taxpayer each £1 that goes into a pension basically costs you just 80p because of tax relief. For higher rate taxpayers it’s just 60p.

If your income is £48,000 a year and you pay £ 3,000 into a pension, then £1,200 of this will come from tax you would have paid, so you will have just £1,800 less spending money.

When you draw your pension you will get 25 pc of the money tax-free. It is also possible that when you retire you will be on a lower tax rate than when you worked. So you may benefit from 40 pc tax relief on pension contributions but pay just 20 pc tax when you draw it.

When you die any money left in your pension falls outside of your estate. If you die before you are 75 the money can be inherited tax-free if it is taken within two years. After 75, the beneficiaries will have to pay tax on it at their highest rate.

SAVE ON HOLIDAY AIRPORT DUTIES

AIR passenger duty rises to £78 per passenger for an economy class long-haul light from April 1. That’s a whopping £312 for a family of four. Add to that the 20pc insurance premium tax on travel insurance and you might wonder if you’d be better off staying at home just to snub the taxman.

ASK FOR A REFUND

EVERY year the tax office charges millions of people too much tax. This can happen if you have multiple sources of income.

Many people also get billed the wrong amount when they cash in their personal pension or take out a lump sum for the first time as HM revenue & Customs presumes you will be taking the same amount every month for the rest of the year.

Call HMRC on 0300 200 3300 for a P50 form. overpaid tax will be refunded in 30 days.