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Are you using tax allowances?

Tax | Income Tax

By Justin Modray, published 13 February 2013.
Helpful? 25

Can you cut your tax bill, either now or in future?

As the end of tax year beckons, it's not a bad time to be thinking about how to stop the taxman from getting his hands on your hard earned cash. Despite Chancellors tightening the belt on tax breaks in recent years, there are still a number of potential useful allowances available.

Of course, they might not all apply to you and don't ever let tax benefits seduce you into making an investment you're not comfortable with - saving tax is pointless if it means sleepless nights and/or losing more money than tax saved.

But a few hours of careful planning could reap worthwhile tax savings.

Here's a list of tax allowances and breaks to consider, along with links to other pages on this site containing more detailed explanations and examples.

Annual AllowancePotential Tax Saving?NotesCalculatorMore Info
IncomeCapital GainsInheritance
Personal Allowance £8,105 (under 65) yes no no No tax payable on income below this allowance. Couples in different tax bands could benefit from holding savings/investments in the non/lower taxpayers name. click click
Release gains £10,600  complete= yes no Gains can be offset, tax-free, against annual capital gains allowance. Spouses can transfer assets between each other to use both allowances. click click
Individual Savings Account (ISA) £11,280 yes yes no You can hold up to half the allowance in cash. No initial tax relief but income not taxable. cash
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Pension Lower of earnings and £50,000 yes yes no Tax relief on contributions but retirement income taxable. click click
Investment Bond Unlimited yes yes no Taxed at basic rate (onshore), but potential to defer or avoid higher rate tax. click click
Ventue Capital Trust (VCT) £200,000 yes yes no Potentially high risk, must be held for at least 5 years. click click
Enterprise Investment Scheme (EIS) £1 million yes yes yes Potentially high risk, must be held for at least 3 years. N/A click
Make a gift £3,000 no no yes Gifts within this allowance fall outside of your estate immediately. Gifts above this will fall outside provided you live for least 7 further years. click click
Charitable Donation Can't reclaim more tax than you owe. yes yes yes Charities can reclaim basic rate tax and higher rate taxpayers can reclaim a further 25p per £1 donated. Gifts also exempt from inheritance and capital gains tax. click click
Premium Bonds £30,000 yes no no Any wins are tax-free. click click
Annual Investment Allowance £250,000 yes no no If you're self-employed you can deduct capital items in the year of purchase from your income tax bill via this allowance. N/A N/A

You can view further details in our End of Tax Year Checklist.

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