As a direct result of the budget system introduced since Boris Johnson became Prime Minister in 2019, British households could pay more than 3,000 a year in taxes by 2026. According to an analysis it conducted. By Resolution Foundation Think Tank.
If you’re like most people, you’re probably worried about what effect such a large tax increase could have on your finances. Don’t panic yet, because there is something you can do to cut your tax bill.
How is the budget system affecting taxes?
Although the recent budget announced a number of tax cuts, including a reduction in business rates, a reduction in alcohol tariffs and a refrigeration of fuel tariffs, there are several major tax increases for the British.
For example, the national insurance and dividend tax will increase by 1.25% in April next year. The corporation tax will increase from 19% to 25% from April 2023.
According to the Resolution Foundation, taxes as a part of the economy will rise to the highest level since 1950 by 2026-27. This is an increase of £ 3,000 per family since Boris Johnson came into office in 2019.
The think tank says higher taxes will fall mainly on middle- and high-income households.
Between 2025-2026, the combined effect of budget policy since Boris took power will increase the income of the poorest fifth household by 2.8%. But middle-income households will see their income lose 2%, while the richest fifth will lose 3.1%.
How can you reduce your tax bill?
Have the recent budget arrangements, including planned tax increases, made you worry about your finances? You are not alone.
Good news when it comes to taxes That’s a couple You can use legitimate methods to reduce your bills and keep more money in your pocket.
1. Check if your tax code is correct
If you are a PAYE employee, your employer uses your tax code to determine how much tax to deduct from your salary. You can find it in your peslip.
If your tax code is wrong, you can pay more tax than you need. This is why it’s a good idea to check every year and after each job change to make sure your code is correct.
If you believe your tax code is incorrect, contact HMRC immediately so they can provide your employer with the correct tax code.
2. See if you are eligible for a tax credit
Tax credits are tax-free state benefits that give extra cash to disabled workers, those who care for children, and those who earn less.
There are two main tax credits Working tax credit And Child tax credit. You may be eligible for both depending on your situation.
More information about this credit, how to test your eligibility and how to apply, can be found on the gov.uk website.
3. Make full use of your ISA allowance
An ISA is a government-approved tax wrapper that you can use to protect your savings or investments from taxes. Any returns from savings or investments held in an ISA are tax-free.
There are different types of ISA including cash ISA and stock and share ISA.
At this point, you can save or invest a maximum of £ 20,000 per year in an ISA. You can keep your money in one type of ISA or spread it out in different ways until you exceed the total allowance of £ 20,000.
4. Pay the pension
When you pay your pension, the government will top up your contribution as a way to encourage you to save for your retirement. This is usually in the form of tax relief. Relief is provided on your pension contribution at the highest rate of income tax you pay.
5. Take advantage of marriage allowance
Marriage allowance allows couples or individuals in civic partnerships to transfer ব্যক্তিগত 1,260 of their personal allowance to each other. So, if you have exceeded your personal allowance, you can ask your partner to transfer some of their allowance to you. If you use the fully authorized amount, you can save about £ 250 in taxes per year.
Please note Tax Treatment depends on the individual situation of each client and may change in the future. The content of this article is for informational purposes only. It is not intended to be, nor does it form, any form Tax Advice readers are responsible for performing their own due diligence and seeking professional advice before making any investment decisions.
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