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There are a number of 'tax-free' and 'tax-deductible' allowances and reliefs you might be able to get to reduce your tax bill - and in some cases mean you've no tax to pay. These include the Personal Allowance, Married Couple's Allowance and some business expenses.
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Nearly everyone who lives in the UK is entitled to an Income Tax Personal Allowance. This is the amount of income you can receive each year without having to pay tax on it.
The amount of your Personal Allowance depends on:
If you're certified blind and are on a local authority register of blind persons, or if you live in Scotland or Northern Ireland and are unable to perform any work for which eyesight is essential, you can claim Blind Person's Allowance. Like your Personal Allowance, this is an amount of income you can get without having to pay tax on it.
If you're married or in a civil partnership, you or your partner may get Married Couple's Allowance if:
There are special rules about who claims Married Couple’s Allowance. The amount you'll receive depends on the level of the claimant's income. Your tax bill will be reduced by ten per cent of the amount of Married Couple’s Allowance you can claim.
You can get an allowance to reduce your tax bill for maintenance payments you make to your ex spouse or former civil partner if:
You can get tax relief for different expenses, depending on whether you're an employee or director or self-employed.
If you're an employee or a director you can get tax relief for business expenses you've paid for and if they were for the cost of:
The sort of expenses you might be able to get relief for include:
If you're self-employed you can get tax relief for all the business expenses you pay that are just for your business. If you pay for something you use for business and privately - like your phone - and the bill can be split, you can get relief for the bit that's just for your business.
Your business expenses might include:
The government encourages you to save for your retirement by giving you tax relief on pension contributions. The way you get tax relief on pension contributions depends on whether you pay into a personal, public service or company pension scheme.
Usually your employer takes the pension contributions from your pay before deducting tax - but not National Insurance contributions. You only pay tax on what's left. However some employers may choose to use the same method of paying contributions that personal pension scheme providers use - see below.
You pay Income Tax on your earnings before any pension contribution, but the pension provider claims back tax from the government at the basic rate of 20 per cent. This means that for every £80 you pay into your pension, you end up with £100 in your pension pot. If you're a higher rate taxpayer, you can claim the difference through your Self Assessment tax return or by making a claim by telephone or letter. If you’re an additional rate taxpayer you’ll have to claim the difference through your tax return.
You can get tax relief if you make gifts to charity. You can do this in a number of different ways.
Gift Aid offers a simple way to increase the value of your donation to charities and Community Amateur Sports Clubs (CASC). It allows the charity or CASC you support to reclaim basic rate tax (20 per cent) on your donation. If you pay tax at the higher rate you can claim the difference through your tax return or by making a claim by telephone or letter. If you’re an additional rate taxpayer you’ll have to claim the difference through your tax return.
If your employer offers the Payroll Giving scheme, you can use it to get tax relief automatically - at your highest income tax rate - on any donations you make to charity direct from your wages or pension pay packet.
If you give certain assets to a charity you can claim tax relief and lower your tax bill. You can also claim tax relief if you sell the asset to a charity at less than its market value.