Britons could earn £16,000 in tax-free income thanks to these five tax breaks which experts are urging people to take advantage of.
Households have been hit hard by the cost of living crisis in recent years which has seen inflation and energy bills skyrocket.
Among the various allowances that people recommended are the marriage allowance and trading allowance.
Furthermore, Government initiatives including the rent-a-room scheme are also a useful way to boost incomes.
Savers are also being reminded to use all available tax credits, as well as their tax-free savings allowance.
Here is a list of the five tax breaks households should take advantage of to boost their income:
- Marriage allowance – £1,256
- Trading allowance – £1,000
- Rent-a-room scheme – £7,500
- Child-free tax credit – £2,000
- Tax-free savings allowance – £5,000.
The marriage allowance tax credit is reserved for couples where one partner earns less than £50,270 annually and the other makes under £12,570; and can be backdated by up to four years.
Entrepreneurs can make up to £1,000 tax-free from side hustles or other business ventures. If you are a basic rate taxpayer this will save you £200 a year, while higher rate earner will put away £400 extra.
Those who rent out their room in the room can bolster their income by upwards of £7,500 annually. However, this is reserved for those who are renting out of their main home, not a separate flat, and the room must be furnished.
Families can benefit from a £2,000 extra in childcare costs with this allowance being split into £500 per quarter. This credit requires parents to open a tax-free childcare account and pay cash into it.
All earners who make less than £12,570 get an extra £5,000 tax-free allowance on their savings income which means they do not pay any interest on money saved.
Laura Suter, AJ Bell’s head of personal finance, outlined why these tax hacks are so vital in helping people navigate the cost of living crisis.
She explained: “Lots of people are paying more tax, thanks to frozen or reduced tax allowances brought in by the current Government. But many households are missing out on entirely legitimate ways to bring in tax-free income.
“These five tax hacks can be used by normal households – you don’t need to be earning hundreds of thousands of pounds and employing an accountant to take advantage.
“One way to amplify the benefit of these tax breaks is to stash your new-found savings into a cash or investment account, meaning that the tax saved today will grow to provide a rainy-day fund in the future or provide a pot of money for your next house move or holiday.”
