The Daily Telegraph - Your Money
Could you benefit from these 362 ways to cut your tax bill?
Tax avoidance has become something of a dirty phrase as the offshore accounts of the rich and famous have been exposed. But legally limiting your tax bill is perfectly legitimate and even officially encouraged via tax reliefs. Last week, the Government published a document laying out the cost of some 362 reliefs on offer.
There are a staggering 81 reliefs available just on income tax, while inheritance tax is responsible for another 37. Of course, not all are available to everyone and some only come into play in highly specific circumstances. But it goes to show just how many permitted ways there are to avoid tax for those in the know.
BOOKS, WINE AND GAMBLING
A lot of us make use of common tax reliefs without realising, just by going about our day-to-day lives.
Value added tax, better known as VAT, is due on most items we buy, but newspapers, books and magazines are exempt. Beware the rise of the Kindle and other e-readers, as this relief does not extend to digital books.
Nimesh Shah, of accountants Blick Rothenberg, pointed out a number of capital gains tax (CGT) exemptions, too. “A lot of people like a glass of wine but it’s little known that if you make a profit from selling your favourite bottle of plonk it’s not taxed,” he said. “This is because wine is regarded as a ‘wasting asset’ which means HM Revenue & Customs says it has a life of less than 50 years and so is exempt from CGT.” The exemption applies even if the wine is more than 50 years old.
Gambling, too, can net you a CGT saving. Winnings aren’t taxed, however losses cannot be offset against CGT bills elsewhere either.
Part-time entrepreneurs can claim additional tax-free earnings for their efforts. Whether selling on eBay or a lemonade stand outside your house, or making extra money by renting out a spare property, earnings outside your
81 The number of reliefs that are available just on income tax
normal work are subject to a £1,000 income tax relief.
LOVE AND MARRIAGE
Some of the best-used reliefs are in the realm of romance and family. Mr Shah said the £5,000 gift exemption for getting married could be a good reason to tie the knot. Each parent can offer up a £5,000 gift, meaning the happy couple can walk away with £20,000 in tax-free cash. Iain McCluskey, of accountants PwC, highlighted another benefit: “One relief the Government is keen to see used is the marriage allowance, where one low earner can transfer £1,250 of their personal allowance to their partner as long as the recipient is a basic-rate taxpayer.” The annual saving is up to £250. Relief is available on payments into a child’s pension of up to £2,880 a year said Saq Hussain, also of PwC. The 20pc relief means this is boosted to £3,600. Mr Hussain said: “Assuming it is a newborn child and you pay the £2,880 in for 18 years, by the time the child retires the pension could be worth more than £1m in today’s money. It is worth noting, however, that under current rules the child would not be able to access the money until they retired.”