Paying tax is something no one looks forward to and anyone would make use of tax saving methods. However, these methods must always be legal as tax avoidance schemes and similar ways of avoiding paying taxes can result in investigation, penalties, and even legal action.
A tax consultancy would always recommend using methods that are within the law when looking for ways to pay less in terms of taxes. And there are several such methods. From claiming benefits that you are eligible for to check your tax code, these are tax saving tips that you will find useful in 2022.
- Check Your Tax Code
One of the top tax saving tips for 2022 is checking your tax code, which is used by your employer or pension provider to calculate the income tax to be deducted from your pay or pension. Your tax code will be included on your payslip or you can find it on a tax code letter from HMRC.
You can also find your tax code for the current year by checking the income tax online service within your personal tax account. This service lets you view your tax code for a previous tax year and as well as the next tax year.
By signing up with Government Gateway, you can also see if your tax code has changed and how much tax you are likely to pay.
There are various reasons for your tax code to change. It could be due to receiving an income from an additional job or pension, getting taxable state benefits, or claiming a marriage allowance. HMRC may also update your tax code if you claim expenses you get tax relief on.
In addition to this, if you change jobs, you may get put on an emergency tax code.
If your tax code is wrong, you could be paying more tax than you need to. A tax consultancy would thus recommend checking your tax code to make sure you are paying the right amount of tax. If you think your tax code is wrong, you can update your employment details using the check your income tax online service.
You can also tell HMRC about a change in income that could have affected your tax code. If your tax consultants will be contacting HMRC on your behalf, they will be required to fill a PAYE Coding Notice query form.
- Tax-Free Allowance
In the UK, the standard personal allowance is £12,570, which means that you are not required to pay tax on this amount of your income. Your personal allowance may increase if you claim marriage allowance, for instance.
However, your personal allowance will reduce if your income is over £100,000 and you will not get a personal allowance on taxable income over £125,140.
If you are not using your personal allowance, a tax consultancy like S&T Associates will be able to help you make sure you are not paying more income tax than you are required to. They can also help you claim income tax reliefs you are eligible for.
HMRC states that tax relief applies to pension contributions, charity donations, maintenance payments and time spent working on a ship outside the UK.
In terms of charity donations, you can claim relief if you donate through Gift Aid or straight from your wages or pension, through Payroll Giving.
If you make maintenance payments to an ex-spouse or civil partner, you can pay less income tax through maintenance payments relief. However, there are several eligibility criteria and tax consultants will be able to check if you can claim maintenance payments relief.
Tax relief also applies to work or business expenses and the tax consultants at S&T Associates can help you get tax relief if you are self-employed, whether as a sole trader or a partner in a partnership.
They can also help you claim tax relief if you are employed and use your own money for travel or items you must buy for your job.
- Reducing Your Capital Gains Tax
If you make a profit when selling or disposing of an asset that has increased in value, you will be required to pay a capital gains tax. This is charged for the profit you make and not the amount of money you receive.
Disposing of an asset could mean selling it, giving it away as a gift or transferring it to someone else, swapping it for something else, or getting compensation for it. Assets that you may be charged capital gains tax for include most personal possessions, apart from your car, worth £6,000 or more and property that is not your main home.
However, your main home could be considered an asset in this regard if you have let it out, used it for business, or if it is very large.
Shares that are not in an ISA or PEP and business assets can also be considered under capital gains tax.
You do not have to pay capital gains tax on overall gains above your tax-free allowance, which is £12,300 or £6,150 for trusts.
There are a few ways to reduce your capital gains tax and pay less. A tax consultancy would be able to help you in this regard, especially taking into consideration your situation and assets. A few tax savings tips for 2022 that tax consultants may suggest include holding investments jointly if you are married.
If a spouse pays a lower rate of tax, they can hold the asset in their name solely.
Another way to pay less capital gains tax is by offsetting investments that made a loss against the profit you made by selling an asset.
- Claim Tax Credits
While you can no longer make a new claim for tax credits, you can make a claim if you already get tax credits. There are two types of tax credits you can claim; Working tax credit and child tax credit. You can claim these by updating your existing tax credit claim.
HMRC states that you can only make a claim for working tax credit if you already get child tax credit.
In order to qualify for working tax credit, there are a certain number of hours a week you need to work for. If you are aged 25 to 59 years, you must work at least 30 hours a week. However, if you are over 60 years, disabled, or single with one or more children, you must work at least 16 hours a week.
If you are a couple with one or more children, at least 24 hours a week is required between you and your partner, with one of you working at least 16 hours.
You can apply for working tax credit even if you are on leave.
If you already get working tax credit, you can make a claim for child tax credit. The child tax credit amount you receive depends on the number of children as well as a few other factors, like if you are making a new claim for child tax credit, already claiming child tax credit, or if child tax credit will affect your child benefit.
You can only claim child tax credit for children you are responsible for. To save on taxes by claiming child tax credit, update your existing tax credit claim by reporting a change in your circumstances.
- Universal Credit
If you are not eligible for either of these, you can apply for universal credit, but if you and your partner are state pension age or older, you may be eligible for pension credit.
Universal credit has replaced several benefits and you can find out exactly how much you can reduce from the taxes you pay by claiming universal credit with the help of a tax consultancy.
Besides child tax credit and working tax credit, universal credit is also replacing housing benefit, income support, income-based jobseeker’s allowance (JSA) and income-related employment and support allowance (ESA).
If you currently get these benefits, you need not do anything to claim universal credit, unless you have a change of circumstances you need to report or the Department for Work and Pensions (DWP) contacts you about moving to universal credit.
With universal credit, your earnings affect your payments and your universal credit payment will reduce as you earn more. HMRC states that for every £1 you earn, your payment reduces by 55p.
If you are on a low income or need help with your living costs, you may be eligible for universal credit. The eligibility criteria require that you live in the UK, are 18 years or older but are under state pension age, and have £16,000 or less in savings.
While you can use a benefits calculator to check what benefits you could get, tax consultants can give you a clear idea of the benefits you can claim.
These are some of the key tax savings tips for 2022 and you can talk to tax consultants at S&T Associates to gain a better understanding of the benefits and claims you are eligible for.
S&T Associates offer tax consultancy services that are among the best in the region. In terms of corporate tax planning, the tax consultants at S&T Associates will handle routine matters of business tax, PAYE, National Insurance, and VAT on your behalf.
Their corporate tax planning services include finding the most tax-effective structure for your business, determining potential tax opportunities and reliefs, and reducing tax on disposals and maximising relief on acquisitions.
In terms of personal tax planning, S&T Associates will offer advice on all personal taxes, including income tax, capital gains tax, inheritance tax, and non-domiciliary taxes, complete relevant returns, and provide advice on trusts and estates.
Whether you require corporate tax planning services or personal tax planning services, S&T Associates will help you find the best tax saving methods in 2022.
