Six ways to legally cut your tax as millions to be dragged into paying MORE this year under Andy Burnham’s Government

A MILLION more workers and pensioners will be forced to pay income tax this year as Andy Burnham backtracks on his plans to increase tax bands. Tax thresholds have been frozen since 2021 and are due to remain fixed until 2030/31, which means 1 million more people will pay £640 more on average this year compared to two years ago. We reveal the legal loopholes you can use to cut your tax bill now Credit: Getty Andy Burnham has backtracked on plans to increase income tax bands Credit: Shutterstock Editorial But there are legal ways to reduce your tax bill now to avoid being hit. We all know that tax evasion is a crime – but there are several legal ways to keep more of your hard-earned cash. Sign up for the First Time Buyer Guide newsletter Thank you! Read on to find out how… Lucky in love? Claim this £1,008 tax perk If you’re lucky in love then you can save £252 a year in tax Credit: Getty If you’re married then you could be missing out on an under-used tax break. If you or your partner earn less than £12,570 and the other spouse earns less than £50,270 then you can take advantage of marriage allowance. The loophole effectively boosts your spouse’s personal allowance by £1,260 a year, to £13,830. Doing this would save them £252 a year in tax. You can also backdate your claim by four years, which could potentially cut your tax bill by £1,008. Most read in Money But around 2.1 million people who are eligible for this tax break are currently not claiming it. To check if you qualify visit tax.service.gov.uk/marriage-allowance-application/benefit-calculator. Get tax advice from an expert (AD) Are you looking for advice on how to pay less tax legally? If you click on this link we will earn affiliate revenue Award-winning independent financial advice firm Kellands Chartered Financial Planners are offering Sun Money readers a free one-hour consultation with their experts worth £250. · Find out more Kellands (Hale) Limited is authorised and regulated by the Financial Conduct Authority. FCA Firm Reference No. 193498 Claim cash on work uniforms You could save hundreds of pounds a year on job expenses such a uniforms or tools Credit: Alamy Don’t let the taxman walk away with money that is rightfully yours. You could be missing out on relief on your job expenses, which means you’ll get to keep more of your income and pay less tax. To get the tax break you need to use your own money to buy things you need for work, which can include items for working from home, uniforms, tools, work clothes, vehicles, travel and overnight costs. Your employer mustn’t give you the money back or any alternative equipment. You will get the relief based on what you have spent and your tax rate. For example, if you claim £800 of tax relief and usually pay tax at 20% then you would get £160 back. The exact amount you could get depends on what you’re claiming for. For more information and to make a claim visit gov.uk/tax-relief-for-employees. Slash your tax bill and boost your income Slash your tax bill by using salary sacrifice to pay into your pension or get childcare vouchers Credit: Getty Did you know you can cut your tax bill by using salary sacrifice? This lets you swap some of your wages for a benefit from your employer, such as childcare vouchers, pension contributions or a company car. Your salary will then be reduced by the cost of the benefit you choose. But as a lower earner you’ll pay less tax and National Insurance. But you’ll need to be quick as the Government is set to close this loophole. From April 2029 the amount you can contribute to your pension using salary sacrifice will be capped at £2,000 a year. Check which benefit your company offers, the total cost and if you can pay for them now or over the next year. Small business benefit You could make £1,000 a year from a hobby If you have a hobby or small business then you can earn extra income from it tax-free. Every person has a trading allowance, which lets them earn up to £1,000 a year from a side hustle without paying tax. You could earn this money from selling clothes online, making arts and crafts or babysitting. Meanwhile, you also get a property allowance of £1,000 a year for income you earn from your home, for example by renting out your attic or driveway. If you maxed out both allowances then you would save £400 in tax on the extra income as a basic-rate taxpayer. Dodge the savings tax trap Avoid paying tax on your savings and you could save hundreds of pounds a year Credit: Getty You may have to pay income tax on the interest you earn from your savings but this can depend on your income. Anyone earning £12,571 to £50,270 a year has an allowance of £1,000 before they pay tax. If you had £20,000 saved in an account with a 5% interest rate then you’d start to pay tax on it. Meanwhile, if you earn £50,271 or more than your allowance falls to just £500. But if someone in your house earns less than £12,570 then they can earn £5,000 in interest before they have to pay tax. If you used this to avoid paying 20% tax on £4,000 of savings then you’d save £800. As a result, it makes sense for your spouse to stash the cash instead. Top account that can stop you paying tax An Isa shields your savings so you never have to pay tax on it Credit: PA If you’re worried about being taxed on your savings interest then an Isa could be perfect for you. You can pay up to £20,000 a year into these tax-free savings accounts. If you had £25,000 in an Isa that pays 5% then you would save £250 in tax compared to keeping the money in a savings account. But you’ll need to be quick as the maximum amount under 65-year olds can save into a cash Isa every tax year is set to fall from £20,000 to £12,000 from April 6, 2027. The total Isa allowance will be locked at £20,000, so you can use your remaining £8,000 to put cash into other types of Isas, such as a Stocks and Shares Isa. Always shop around to make sure you’re getting the best rate. Use a comparison website such as MoneyfactsCompare to see what rates are on offer and how to apply. Comment now