Six ways to pay less tax – and it could save you THOUSANDS

FEW people like handing money over to the taxman – but there are some ways you can reduce the amount you pay, and they’re perfectly legit.

Understanding all the different allowances and schemes available to you could lower your tax bill and save you thousands.

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This week we covered a raft of ways to slash your energy, childcare and tax bills with budget-boosting tricks.

Here, we round up some of the easiest ways to give less money to HMRC:

Check your tax code

First up, check you’re paying the right amount of tax.

Your tax code indicates how much you’ll hand over to the Revenue – you can find it on your payslip.

The standard tax code for basic-rate taxpayers is 1257L, which means you can earn £12,570 a year before paying tax (you can work out what your personal allowance is by multiplying your code by 10).

You can check if your tax code is correct by using HMRC’s online tool or MoneySavingExpert’s free online tax calculator.

If it’s wrong, contact HMRC on 0300 200 3300 – you could be due a rebate worth thousands.

If your tax code is wrong, it’s your responsibility to let HMRC know, so be sure to check it each tax year and particularly if you change job or get a pay rise.

Pay into a pension

Money you save for retirement gets tax relief, effectively giving you a free boost to your savings pot.

Basic rate taxpayers get relief of 20%. That means every £1 you put into your pension pot only actually costs you 80p.

Paying extra into a pension is a particularly good idea if you’ve just edged over into the higher-rate tax band.

Those earning above £50,000 pay 40% tax on this part of their salary.

So if you earn £51,000 a year, saving £1,000 into your pension will effectively bring you back into the basic rate tax band.

That means you only pay the standard 20% tax on your earnings, and the £1,000 put into your pension gets 40% tax relief.

Make use of the marriage allowance

Married couples can make use of an allowance that will save them a few hundred quid each year.

Each year, workers can typically earn £12,570 before they start paying any tax (known as a personal allowance).

If one half of a married couple is earning less than this amount, they can transfer some of their remaining allowance to their higher-earning spouse.

In the current 2022/23 tax year, you can transfer £1,260 over, which effectively saves your partner £252 on your tax bill.

In addition to this year’s allowance, you can backdate it over the past four tax years too, so you could potentially get over £1,200 back.

Unfortunately, You can’t claim marriage allowance if you’re living together but you’re not married or in a civil partnership.

To work out how much you will get you can use the government’s marriage allowance calculator.

Rent out a spare room, shed or driveway

The soaring popularity of home-sharing websites such as AirBnb means that more people can take advantage of Rent-a-Room Relief.

This is a government scheme whereby you can earn up to £7,500 a year by renting out spare space in your home without paying any tax.

This could be letting out a spare room to holidaymakers or a shed or garage to people who need extra storage.

Those who live near a train station or popular destination could even rent out their driveway.

How much you can make will depend on where you live and how in demand your space is.

But if you cross the £7,500 threshold, you’ll have to tell the taxman.

Stop paying National Insurance

National Insurance Contributions were increased in April and many workers will have noticed more money disappearing from their pay packet each month as a result.

But older workers could opt out altogether, according to Which?

If you keep working beyond state pension age – which is currently 66 years old – you shouldn’t need to keep making the payments.

To opt-out, you’ll need to let your employer know so it can adjust your pay.

Doing so could save you thousands – under the current rate, those earning £25,000 pay £2,045 a year in National Insurance, and those on a £50,000 salary pay £5,357.

Take advantage of work perks

If your employer offers certain benefits, it could reduce your tax bill.

Train commuters, for example, can apply for a season ticket loan from their company.

Your employer gives you the amount you need for an annual ticket and you repay the loan in monthly instalments through your wages.

Not only will this reduce your overall travel costs, but because the money comes out of your salary, you pay less tax.

A cycle to work scheme operates in the same way – you can get a loan for a new bike and repay the money through you salary.

And you could even use salary sacrifice schemes to buy an electric vehicle.

This post first appeared on thesun.co.uk