New tax year: an expert suggests an “effective way to reduce your tax bill” | Personal finance | Finance


With the tax year just beginning, now may be the time for people to get their finances in order and make sure they take advantage of all the tax breaks available to them. James Norton, head of financial planners at Vanguard, spoke exclusively to Express.co.uk about the different ways Britons can save on tax this year.

Capital gains tax (CGT)
Mr Norton explained that at present every Briton receives an annual allowance of £12,300 from any capital gains they might be lucky enough to make on the investments they sell.

Below this threshold there is no CGT to pay. However, by housing the investments in an Individual Savings Account (ISA), people can bypass CGT altogether.

He said: “The amount you can put away in an ISA is set at £20,000 per year per adult, and it also protects you from any income tax on any interest or dividends you may earn, respectively, on your bonds and your stock market. investments.

“Remember that each individual has their own allowance, so a married couple can potentially make gains of £24,600 this tax year without incurring tax.

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“In most cases, you can also transfer assets between spouses and civil partners tax-free, so it may be a good idea to consider transferring assets to a spouse in a lower tax bracket or to a spouse who has not used his allowance.”

national insurance
To encourage people to save for retirement, the government is offering pension tax relief, including self-invested personal pensions (RSPPs).

Mr Norton explained that at present people can pay 100% of their annual gross earnings up to a maximum of £40,000 into a pension and have the tax originally deducted from their wages refunded.

He added: “If you are a basic rate taxpayer, this money is automatically added to your pension – this way £32,000 invested in your pension can become £40,000. If you are a higher rate taxpayer, you can claim the remainder through your annual self-assessment. »

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National Insurance increases by 1.25 percentage points, at a time when the cost of living is rising.

This means that anything you earn above the tax-free threshold was taxed at 12% and will now be taxed at 13.25%.

If someone is earning £27,000 a year, they will end up paying around £2,053 in National Insurance a year.

This will now increase by over £200.

Across the economy, this equates to an £11billion tax increase for the government.

Inheritance tax
Mr Norton said: ‘Gift Allowance is an effective way to lower your tax bill when it comes to Inheritance Tax (IHT).

“Anyone can donate up to £3,000 per tax year, to reduce their estate, with no other potential tax consequences for the IHT.

“Your unused allowance can be carried over to a tax year. Plus, you can give as many gifts up to £250 to as many people as you want.

Taxpayers are being called on to find new ways to save money as inheritance tax (IHT) revenues continue to rise.

Recent statistics from the IHT revealed that tax revenue reached a record high of £5.36 billion for the period between April 2021 and February 2022.

This is a notable increase of £700million on the amount recorded by HM Revenue and Customs HMRC in the same period last year.

Currently the IHT threshold remains frozen at £325,000, the value of many domains has only increased in value.

As a result, more families are being pressured into paying inheritance tax and experts fear many will carry on into the new tax year.

He reminded Britons that if they have any doubts or questions about their finances, or are unsure where to start, they should consider speaking to a financial adviser.

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