2) Give to charity
Donating to charity is tax free, if done using gift aid or directly from a worker’s wages or pension – known as “payroll giving”.
If you make a charitable donation of £80 under gift aid this is treated as £100 under tax rules, from which £20 has been held back by HM Revenue & Customs. The charity can then claim back this additional £20 to make it up to £100. So a basic-rate taxpayer is effectively being given 20pc tax relief on a £100 donation.
A higher-rate taxpayer can obtain a further £20 tax relief with £25 for an additional-rate taxpayer. This claim is made in the tax return for those on self-assessment.
3) Marriage tax allowance
The marriage allowance allows spouses or civil partners to pass on up to £1,260 of their tax-free personal allowance – currently £12,570 – to their other half, cutting their partner’s tax bill by as much as £252 a year.
To qualify, the partner passing on their allowance must be a non-taxpayer, while the receiver must be a basic-rate taxpayer. It can be particularly useful for families in which one partner takes time out of work to care for children.
Couples can receive a rebate for any unclaimed allowance, going as far back as five years.
4) Check your tax code
Millions of people overpay tax each year, in part because of incorrect tax codes sent out by HMRC. Do not assume the tax code given to you by the tax authority is correct.
HMRC does not wait until a return has been filed for the January 31 deadline before sending out new codes in February, meaning it often does not have the most recent information. It has even been known to make huge errors, such as sending employees in Wales the tax codes of Scottish workers.
5) Challenge HMRC on rebates
As above, HMRC does not always get it right and incorrect tax codes, amongst other issues, can lead to workers paying more tax than they actually owe. If this is the case, it is important you ask HMRC to return your hard-earned money.
You can claim a tax rebate free of charge on HMRC’s website. Be wary of middlemen agents who offer to claim the money back on your behalf, and take hundreds and sometimes thousands of pounds in commission in the process.