5 ways to save tax during the cost of living crisis.
5 ways to save tax during the cost of living crisis.
With the cost-of-living continuously rising, we’ve put together a short-list of five ways in which you may be able to save a little money through legitimate, everyday tax reductions or refunds. What you are eligible for will of course depend on your circumstances. You can learn more about each of these below.
One: Defer employer National Insurance and claim a refund.
Employees with more than one job may be able to defer paying Class 1 National Insurance (NI).
You can do this if any of the following apply:
You pay Class 1 NI with more than one employer
You earn £967 or more per week from one job over the tax year
You earn £1,157 or more per week from 2 jobs over the tax year
You will usually pay a reduced rate of 3.25% on your weekly earnings between £190 and £967 in one of your jobs (instead of the standard rate of 13.25%).
You can learn more on gov.uk.
You could also apply for a refund if you feel you are due one, and certainly if you have more than one job it’s very possible you will be.
There is no time limit for claiming if you overpaid because you had more than one job.
You must claim the refund within 6 years if you overpaid because:
You shouldn’t have paid National Insurance, for example you have reached State Pension age
You paid the wrong rate
Your employer made a mistake
You may be able to claim after this deadline if you have a reasonable excuse.
You can claim a refund on gov.uk.
Two: Make the most of your Marriage Allowance.
Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife, or civil partner. The standard Personal Allowance is currently set at £12,570.
This reduces the recipient’s tax by up to £252 in the 2022/23 tax year.
To benefit as a couple, you (as the lower earner) must normally have an income below your Personal Allowance.
When you transfer some of your Personal Allowance to your husband, wife, or civil partner you might have to pay more tax yourself, but you could still pay less as a couple.
You can learn more on gov.uk.
The Marriage Allowance is not to be confused with the Married Couple’s Allowance, which applies to married couple’s where one of you was born before 6 April 1935. This allowance can save you anywhere between £364 and £941.50 a year.
You can find out more about that here.
Three: Check your tax code to make sure you are paying the right amount.
Your tax code is used by your employer or pension provider to work out how much Income Tax to take from your pay or pension. HMRC will tell them which code to use.
Use the check your Income Tax online service within your Personal Tax Account to find your tax code for the current year. If you think your tax code is wrong, you can update your employment details using the online service.
You can also tell HMRC about a change in income that may have affected your tax code.
In our experience tax codes are often incorrect – but worse, is that without your proactive intervention in alerting HMRC to this fact, and then requesting a refund, it’s likely this could go undetected for years.
Four: Make the most of the ‘tax-free childcare scheme’.
You can receive up to £500 every 3 months (£2,000 a year) for each of your children (aged 11 or under) to help with the costs of childcare. This goes up to £1,000 every 3 months if a child is disabled (£4,000 a year).
You can use this money to pay for approved childcare, for example childminders, nurseries, and nannies, and after school clubs and play schemes. Your childcare provider must be signed up to the scheme before you can pay them and benefit from Tax-Free Childcare.
You can usually get Tax-Free Childcare if you (and your partner if you have one) are:
In work
On sick leave or annual leave
On shared parental, maternity, paternity, or adoption leave
Other eligibility criteria apply in respect of your income (and your partner’s income, if you have one), your child’s age and circumstances, and your immigration status.
You can apply on gov.uk.
Five: Check if you are eligible for a Council Tax reduction.
There are two schemes in existence which enable you to pay lower-than-normal council tax rates. Council Tax is one of the highest single household expenses we face, with 2022/23 rates in Kent ranging from £974.16 for a Band A property, up to £2,922.48 for a Band H. So, if you are eligible for a discount or reduction, it’s well worth claiming.
Council Tax Reduction
You could be eligible for a reduction of up to 100% if you are on a low income or you claim benefits. You can apply if you own your home, rent, are unemployed or working.
The reduction you will receive depends on:
Where you live - each council runs its own scheme
Your circumstances (for example income, number of children, benefits, residency status)
Your household income - this includes savings, pensions, and your partner’s income
If your children live with you
If other adults live with you
You can apply online here.
Council Tax Discount
You will receive a discount of 50% if everyone living in your household is ‘disregarded’. You can learn about who may fall into this category on gov.uk.
You will receive a discount of 25% if you pay Council Tax and either:
You live on your own
Everyone else in your home is disregarded
Contact your local council if you’re unsure about whether you are eligible for a discount.
You can apply for the discount here.
Other help is available for those aged over 18 and separately for those over State Pension age:
Over 18 but under State Pension age - Universal Credit is a payment to help with your living costs. You may be able to claim it if you are on a low income, out of work or you cannot work.
Over State Pension age - Pension Credit gives you extra money to help with your living costs if you’re over State Pension age and on a low income. Pension Credit can also help with housing costs such as ground rent or service charges.
If you are eligible for Pension Credit, you can also receive other help, such as:
Housing Benefit if you rent the property you live in
Support for Mortgage Interest if you own the property you live in
A free TV licence if you’re aged 75 or over
Help with NHS dental treatment, glasses, and transport costs for hospital appointments
Help with your heating costs through the Warm Home Discount Scheme
A discount on the Royal Mail redirection service if you’re moving house
How we can help.
We can provide financial advice on a wide variety of topics, including investing, pensions and retirement, protecting your family and finances in the event of ill-health and death, protecting your business in the event of loss of a key employee or partner, pensions auto-enrolment for businesses, inheritance tax planning, long-term care finances and equity release. We can also help you with all your mortgage needs, whether personal or for your business. Additionally, we have specialists who can help with all aspects of your divorce finances, whatever stage of the divorce you are in.
What’s next?
If you need help or advice on your personal or business finances or if you want to consider investing to make your money work harder, you can get in touch with one of our advisors for independent financial advice. We offer a free initial consultation and although we are based in Tunbridge Wells, we advise clients across the UK.
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. Past performance is not a reliable indicator of future results. Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Equity Release will reduce the value of your estate and may affect your entitlement to state benefits. Tax rules can change, and the benefits depend on individual circumstances. Our advice services are aimed at persons resident in the UK. The information contained within this document is general in nature and does not constitute legal, tax, or financial advice.