Four easy ways to pay less tax

Check your tax codes

The first step in reducing your tax bill is to make sure your tax code is correct, as this determines how you're taxed.

HM Revenue & Customs does make mistakes, especially with age allowances for people aged 65 and above, so if you're not convinced yours tallies with your situation, contact your tax office.

Another code that often goes awry is your council tax band. These were set back in 1991, with the property valuations carried out super speedily.

If you think your property is in too high a band, contact the Valuation Office Agency; you can check your band on its website or the Scottish Assessors Association for Scottish residents.

Be tax-efficient

As well as checking your codes, Bob Perkins, technical manager at independent financial advisers Origen, says check your affairs are arranged as tax-efficiently as possible.

"Look at all your savings and investments. Have you used your ISA allowance? Might you be better off moving into assets producing growth rather than income?

"If you're married and your spouse is in a lower tax band, put them in their name to reduce tax," he says.

Pension planning

Your pension planning can also deliver considerable tax Savings. You'll receive tax relief on your contributions, so for every £80 you pay into a pension scheme, the taxman will give you a further £20.

And, although the regulations are tightening up for high earners, if you're a higher-rate taxpayer earning less than £130,000, at present you can claim a further 20% tax relief through your tax return.

The pension rules also allow you to pay into a pension if you're not earning. "If your husband or wife isn't earning you can pay in up to £2,880 into their pension and this will be topped up with tax relief to £3,600," says Perkins.

For more on reducing your tax bill read: Cut your tax bill in one day

Plan ahead

You might also want to consider some forward planning by thinking about inheritance tax. Under the current rules, which may be liable to change under the Conservative-Liberal coalition government, you can leave up to £325,000 inheritance tax free, with anything above this taxed at 40%.

"It could potentially be a big bill but if you regularly review your situation and take advantage of planning tools such as the inheritance tax exemptions, you can reduce a future bill," says Perkins. 

Remember that spouse's can carry over their partner's inheritance tax limit and you can gift away up to £3,000 tax-free and make as many small gifts of £250 without paying any tax.

Tax-efficient products not to be missed

ISAs – Allow you to invest up to £10,200 this tax year, with up to £5,100 in cash and the balance in stocks and shares. Interest is tax-free and, on stocks and shares ISAs, there's no capital gains tax or any further income tax on the dividends.

Read: The best cash ISA rates

Tax exempt savings bonds – Offered by friendly societies, these allow you to save up to £25 a month or £270 annually in stocks and shares. Provided you hold the bond for at least 10 years, you'll receive a tax-free lump sum at maturity. 

Pension – as well as tax relief on any contributions you make, you can also take up to 25% of your pension pot as a tax-free lump sum when you retire.

Salary sacrifice – by redirecting, or sacrificing, some of your salary you can benefit from tax and national insurance savings on employee benefits such as pensions, cycle to work schemes and childcare vouchers.

Your Comments

Hi..Can somebody please explain what or how this can be claimed ' if you're a higher-rate taxpayer earning less than £130,000, at present you can claim a further 20% tax relief through your tax return..


When you complete your self-assess tax return, you can put in pension contributions paid out of taxed income. This will automatically give you the reduction if you are a higher rate payer.