THE new tax year is the perfect time to reassess your finances.
Everyone is feeling the pinch with rising , there has never been a more important time to use up all your tax allowances.
This week, Mel Hunter reveals six new tax year checks that could save you thousands of pounds.
USE YOUR SIDE HUSTLE ALLOWANCE – WORTH £200
Around half of Brits have a , and everyone can earn up to £1,000 tax-free by making outside their main job, like cat-sitting or doing some .
Laura Suter, AJ Bell personal finance director, says: “The ‘trading allowance’ means that if you earn £1,000 from property or trading income, it will be tax-free – if you’re a basic-rate taxpayer, this will save you up to £200 a year.”;
“If you earn less than £1,000 a year from your side hustle, then you won’t usually need to fill out a tax return. Just keep relevant paperwork in case asks for it later.”;
If you earn more than £1,000 from your side hustle in a tax year, you’ll still get the tax break, but you’ll need to pay tax on income above that.
CHECK PROPERTY ALLOWANCES – WORTH UP TO £3,200
There are a couple of different tax breaks for people who make money from their .
Those who rent out a furnished room under their own roof can make up to £7,500 a year tax-free through rent-a-room relief, saving up to £1,500 a year as a basic-rate taxpayer or £3,000 if they pay 40 per cent tax.
Laura warns: “If you own the property jointly with someone and split the income, you only get half the relief per person.
“If you earn less than £7,500 a year from out a room, you won’t need to fill in a tax return, but if you earn more than the tax-free limit, you will.”;
There is also a £1,000 property trading income allowance which can give a tax break to those who make money from their homes, including renting out their driveway or garage, saving them up to £200.
USE YOUR ISA ALLOWANCE – WORTH £1,000 FOR A LIFETIME ISA
Every adult has a £20,000 ISA allowance each tax year, meaning you don’t have to pay tax on the interest.
That said, basic-rate taxpayers can earn up to £1,000 interest tax-free a year anyway. With current rates, a basic-rate taxpayer would need to have savings of more than £21,000 a year to start paying tax on savings.
If that’s you, then an ISA is an important way to protect you from paying tax on interest from that account.
There are rumours that the amount you can invest in ISAs could be cut later this year, so act to save sooner rather than later.
You can choose whether to put it in a cash or stocks and shares ISA or a mixture of the two.
Laura says: “Lots of people default to cash ISAs, but it’s worth considering ISAs too.
“Recent data from AJ Bell found that if £1,000 was saved at the start of every tax year since the ISA was launched in April 1999, it would have turned into £34,392 if it was invested in the average Cash ISA account, or £83,603 if it was invested via a stocks and shares ISA.”;
There is also a Lifetime ISA for 18- to 39-year-olds who plan to buy a property under £450,000.
You can pay £4,000 a year into the account, which will then be topped up by up to £1,000 in government bonuses.
REGISTER FOR TAX-FREE CHILDCARE – WORTH UP TO £2,000
Families can claim up to £2,000 a year per child towards childcare costs (£4,000 for a disabled child) up until the start of September following their 11th birthday (or 16 if they have a disability), which can take the out of nursery, childminder, or holiday club costs.
Around 1.3 million families are eligible, but 800,000 aren't currently claiming.
Laura explains: “For every £8 you pay into the account, the government will add £2.”;
Apply at gov.uk/tax-free-childcare.
CLAIM MARRIAGE ALLOWANCE – WORTH UP TO £252
The allowance is a great way to claim some money back if you’re married and one of you earns under £50,270 a year, while the other either earns less than £12,570 or doesn’t earn any money at all.
The person who doesn’t meet the tax threshold can transfer 10 per cent of their personal allowance to their partner, which could save them up to £252 in the current tax year.
Laura says: “You can backdate any claims for up to four years, assuming you were eligible.”;
Around 2 million couples who qualify are currently missing out. They can claim, with no fee, at gov.uk.
Beware of scam websites that charge a fee.
USE HELP TO SAVE SCHEME – WORTH UP TO £300 A YEAR
Lower earners receiving may be able to open a Help to Save account – and pocket a £1,200 bonus after four years.
Those who qualify should save between £1 and £50 a month, though you don’t need to do it every month, and after two years you’ll get up to half of your highest savings balance as a bonus.
After four years you get another bonus of half the savings you’ve made in the last two years.
If you save the maximum £50 every month, you’ll get £1,200 bonus from the Government in total.
