UK Tax Allowances: An Overview
The United Kingdom has a complex system of tax allowances and deductions that can be used to reduce the amount of income tax you owe. Understanding the different allowances and deductions available can help you to make the most of your money and reduce the amount of tax you owe. In this blog post, we’ll provide an overview of the different UK tax allowances and deductions that are available.
Personal Allowance: The Basics
The personal allowance is the amount of income you are allowed to earn before you start paying income tax. The personal allowance for the 2020-2021 tax year is £12,500. This means that if you earn less than £12,500 in a year, you won’t have to pay any income tax.
Marriage Allowance: Benefits for Married Couples
The marriage allowance is a tax allowance that allows married couples to transfer up to 10% of their personal allowance to their spouse or civil partner. This can reduce the amount of tax they owe and can give a tax saving of up to £250 a year.
Tax-Free Savings: Investing Your Money
The UK has a range of tax-free savings options that allow you to save money without paying any tax on the interest. These include Individual Savings Accounts (ISAs) and Junior ISAs. There are limits on how much you can save each year, so it’s important to check the limits before investing.
Income Tax Reliefs: Reducing Your Tax Bill
Income tax reliefs are deductions that can be claimed on your tax return to reduce the amount of tax you owe. These include deductions for pension contributions, charitable donations, and business expenses. It’s important to check which reliefs you are eligible for and how to claim them.
Tax Credits: Additional Support
Tax credits are payments from the government that are designed to help people on low incomes. There are two types of tax credits: Working Tax Credit and Child Tax Credit. To be eligible for tax credits, you must meet certain criteria and you must submit a claim to the government.
Capital Gains Tax: Understanding Your Obligations
Capital gains tax is a tax on the profit you make when you sell an asset, such as a property or shares. The amount of capital gains tax you pay depends on the asset you are selling and the amount of profit you make. It’s important to understand your obligations when it comes to capital gains tax to ensure you don’t pay more tax than you need to.