Unlocking Your Tax-Free Treasures: Boost Your Income by £16,000

From renting out a room to claiming child allowances, there are myriad ways families can tap into to increase their earnings without having the taxman at their door. The UK tax system might seem complicated, but if we dig deeper, we can find some nifty ways to enhance our income without paying more. The Daily Express has a list of some opportunities.

Understanding the Landscape

Freezing tax allowances might be a cause for concern for many as it inadvertently pushes many into paying more tax. The good news is, the UK government has several tax reliefs in place that many are unaware of or aren’t fully utilising. By understanding and leveraging these tax breaks, households can boost their earnings by a substantial amount, and here’s how.

1. Sharing the Love: Marriage Allowance – £1,256

For married couples or those in a civil partnership, there’s a potential financial perk waiting for you. If one person earns less than £50,270 a year and the other either has an income below £12,570 or none at all, you can utilise the marriage allowance. Essentially, if one person doesn’t fully use their Personal Allowance of £12,570 a year, it can be transferred to their partner. This strategy could save you up to £252 each tax year.

What’s even sweeter? Claims can be backdated for up to four years if you were eligible during those years. This totals to a potential £1,256. Claiming it is simple through the Government’s online portal. Just keep an eye out for fake websites trying to impersonate the official government site.

2. Side Hustles and the Trading Allowance – £1,000

We all have those small gigs on the side, from babysitting to selling old items online. With the trading allowance, everyone can earn a tax-free £1,000 annually from these extra income streams. If your earnings don’t exceed this limit, there’s no need to go through the hassle of a tax return. Just ensure to have a record of your earnings.

However, if your side gigs rake in more than £1,000, you still get to enjoy the tax break but will need to declare the additional income on a tax return.

3. Rent-a-Room Scheme – £7,500

With the rising costs of mortgages, renting out a spare room in your house can be a smart move. Through the Rent-a-Room scheme, homeowners can earn up to £7,500 a year tax-free. To be eligible, you must be renting out a furnished room or multiple rooms in your main residence.

Even if you’re a tenant, you can benefit from this scheme by subletting, provided your lease agreement permits it.

4. Lightening the Childcare Load – £2,000

Parents, here’s one for you. With the tax-free childcare scheme, families can claim up to £2,000 annually for each child, helping alleviate some of the financial pressures from nursery, childminder or holiday club costs. By setting up a tax-free childcare account and depositing £8, the government chips in with an additional £2.

There are some eligibility criteria to be mindful of, such as both parents needing to work a minimum of 16 hours a week and earning below £100,000 per annum.

5. A Bonus for Savers – £5,000

For those with incomes of £12,570 or less, there’s an additional tax-free allowance waiting in the wings. Known as the ‘starting rate for savers’, individuals can earn interest on savings up to £5,000 without any tax. This essentially means having up to £100,000 in savings without a tax burden.

And even if you’re in the £12,570 to £17,570 income bracket, you can still benefit, albeit on a scaled-down amount. This allowance is especially beneficial for retired couples with significant savings.

In Conclusion

The UK tax system, while intricate, offers numerous avenues to save and make money. By understanding and leveraging these breaks, families and individuals can significantly boost their income, giving them more financial freedom and security. So, whether it’s by sharing your personal allowance with your spouse or renting out a room in your home, there’s potential for everyone to benefit. Don’t leave money on the table; claim what’s rightfully yours!