THREE SIMPLE STEPS THAT CAN KEEP YOUR TAX BILL IN CHECK
There are a number of steps people can take to protect more of their money from the taxman – many of which are low-cost and simple.
Firstly, savers and investors should move as much of their savings into an Isa as possible.
Everyone can save up to £20,000 a year into an Isa, with April 6 marking the start of the new tax year – and so the start of a new annual limit.
Money in an Isa does not incur any capital gains tax, dividend tax or income tax – meaning that earnings from it will not count towards your personal savings or dividend allowance either.
Investors who have large sums outside of an Isa should tactically move their investments inside one in the most taxefficient way possible.
For example, a higher-rate taxpayer with dividend income of more than £2,000 a year should move their income-paying investments into an Isa first.
However, an additional-rate taxpayer who has savings income (and no personal savings allowance) should move that money into an Isa first.
Sacrificing your salary does not initially sound like it will boost your take-home pay, but it can.
Some employers allow their staff to sacrifice some of their salary in return for benefits, such as pensions, childcare vouchers and bike-to-work schemes.
Because these benefits are effectively paid for by a reduction in salary, employees save on income tax and National Insurance.
They can also move an individual back into a lower tax bracket – giving you back valuable tax breaks that you may have otherwise lost.
If you can afford to lock up some of your income, you can also increase your pension contributions to cut your tax bill.
Higher-rate taxpayers get 40pc tax relief on any pension contributions, compared with just 20pc for basic-rate taxpayers.
The tax relief is granted at the highest rate of income tax that you pay, meaning that more contributions allow you to avoid more higher-rate tax.