Did you know, there is a way you can ‘earn’ more than £40,000 tax free? This is by taking advantage of the various annual tax-free allowances the Treasury offers. Some you will be benefiting from already, but there may be others you didn’t know about and would like to take advantage of. Here are more details.
Personal allowance: everyone has a personal allowance that they earn tax free, and currently this is up to £12,570.
If you are a shareholder, you can earn £2,000 tax free from dividends.
Rent-room-relief is available at a rate of £7,500 per year, where you rent a room in your home.
If you let out land or buildings, that don’t fall under rent-a-room relief, you can get property income allowance of £1,000 (for example, you might rent out driveway space).
If you sell an asset that is liable to Capital Gains Tax, you have an annual allowance of £12,300 and any gain up to that point will be tax free.
You can earn £1,000 interest on savings, tax-free, called a personal savings allowance (this drops to £500 if you are a higher rate tax payer). This doesn’t include your cash ISA or stocks and shares ISA allowances, which are already tax free.
If your taxable income is low, you can earn an additional £5,000 in tax-free interest as a starting savings rate.
You can claim up to £1,000 tax-free traders’ allowance, if, for example, you run a small self-employed business selling goods on eBay.
Another one to remember is the Marriage Allowance, which could bring in an extra £252 per year in reduced tax. Here, you (or your spouse) transfers £1,260 of personal allowance to the other spouse (that can be husband, wife or civil partner). To benefit, the person receiving the transfer must be earning less than their personal allowance.
Totalled up, this comes to £43,630.
With inflation going up and interest rates looking set to rise too, and all the pressure this puts on the household income, taking advantage of tax-free allowances is well worth looking into.
For any help and advice with tax planning, please get in touch with the team here at Optimum. We work with clients in Swindon, Cheltenham, Wiltshire, Gloucestershire and the wider area.