Are you set up tax efficiently?
Posted on 25th January 2023
Understanding how much you pay in tax can be crucial to financial stability, especially in the cost-of-living crisis.
There are a range of tax reliefs and benefits which are available, you may be eligible for these.
Income Tax Relief
You may able to able to claim an Income Tax Relief on private pension contributions.
If the tax rate is 20 per cent, you should be given these automatically.
There is also a lower allowance for very high earners or those who have already begun taking money from a pension.
Additionally, if you make maintenance payments to a former spouse or civil partner, you could be eligible for another income tax relief.
If you are entitled to this, the relief is worth 10 per cent of your payments, with a maximum of £364 per year.
This applies when you pay maintenance under a court order for your ex-partner or children under the age of 21 and either of you were born before 6 April 1935.
If you are married or in a civil partnership, you could be missing out on a tax relief of up to £252.
The Marriage Allowance allows you to transfer up to £1,260 of your Personal Allowance to your partner, effectively reducing your taxable income.
Eligible couples must have one partner who earns below the Personal Allowance threshold (£12,570) and the other partner pays Income Tax at the basic rate. The claim can also be backdated up to 5 April 2018.
Dividend Tax Allowance
Balancing your pay carefully between a salary and dividends from the profits of your business can be a great way of reducing the amount of tax you pay.
Every individual has a £2,000 annual dividend allowance. If you receive dividends in excess of this amount you will have to pay tax, albeit a slightly reduced rate to regular income tax, in most cases.
If you need advice on claiming tax relief, contact us today.
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