Hunt is partly to blame for the rocketing tax burden that saw the Treasury pocket an extra £10.5billion between April and June, on receipts totalling £189billion. This could add up to an extra £40billion over the current financial year, money that is needed to shrink the deficit but could also be used to boost the economy by lowering today’s punitive tax rates.
Even if Hunt does offer a tax cut it is likely to be peanuts while the burden may rise as the population ages. Labour may also hike taxes if it wins the next election, despite denials.
So don’t wait for the politicians. Here are some forgotten allowances that could help you shave some hundreds or even thousands of pounds off your annual bill, and make your life a little less taxing.
Taxpayers have a double reason to make full use of their tax-free £20,000 Isa allowance this year.
First, Hunt slashed the annual allowance for investment dividends generated outside of an Isa from £2,000 to just £1,000 from April. It will fall to just £500 next year, with any dividends above that heavily taxed.
Yet there is no tax to pay on the dividend income from shares or investment funds held inside an Isa.
Second, rising savings rates mean that millions now risk exceeding their personal savings allowance and paying income tax on their interest for the first time in years, said Laura Suter, head of personal finance at AJ Bell.
All the interest from a cash Isa is free of income tax for life. “Savers have woken up to the danger and put more than £9billion into cash Isas in the first three months of this tax year, the highest since Isas were launched in 1999.”
Savers with income below the £12,570 personal allowance get a further tax break called the “starting rate for savers” allowing them to earn an extra £5,000 of tax-free savings interest.
The rules are complex, as for every £1 of income you earn over £12,570 you lose £1 of the allowance, but Suter said: “It is particularly handy for retirees with decent savings where one partner only gets the state pension.”
The government offers a useful tax break for married couples and civil partners called the marriage allowance. This applies where one partner earns more than the £50,270 higher rate tax threshold, and the other earns less than £12,570.
Effectively, the lower earner hands over their personal allowance to their partner, in a move that saves up to £252 in the current tax year.
Suter said couples can backdate any claims for up to four years, if eligible in that time, and get a total of £1,256. Claim online via Gov.uk but beware scam websites.
Everyone can earn up to £1,000 a year tax free from side hustles separate from their main job under the trading allowance, Suter said. “It is great for people doing a bit of work on the side, for example babysitting, selling items online, renting out their driveway, dog-walking or even selling jam at the local market.”
Those earning less than £1,000 do not usually need to fill out a tax return, but should keep paperwork just in case. “If you earn more than £1,000 you still get the tax break but need to declare the extra income.”
The Government allows anyone who takes in a lodger under the Rent-a-Room scheme to earn £7,500 a year before paying tax. “The room, or multiple rooms, must be in your home rather than a separate flat, and must be furnished,” Suter said.
If you own the property jointly with someone and split the income you only get half the relief per person, or £3,750 each.
READ MORE: Inflation set to RISE in new blow for mortgage rates, house prices and tax cuts
Families can claim up to £2,000 a year for children under 11 towards nursery, childminder or holiday club costs. This rises to £4,000 for disabled children until they turn 16.
First, open a tax-free childcare account. The government will add £2 for every £8 you pay in, and parents pay the nursery direct.
To qualify, both parents must be earning minimum wage for at least 16 hours a week, but earn less than £100,000 each.
Parents can claim this on top of the 30-hours of free childcare, if eligible. Register via your Government gateway account.
The income tax freeze is probably the most punishing stealth tax of all, with few options to fight back either.
One option is to make more bigger contributions to a personal pension, and claim tax relief at either 20, 40 or 45 per cent.
Workers could take advantage of a company salary sacrifice scheme, if it offers one, said Becky O’Connor, director of public affairs at PensionBee. “This is where your employer agrees to pay some of your salary as pension, giving income tax and National Insurance savings.”
HMRC is taking more money than ever from both inheritance tax and capital gains tax, but again, careful planning may reduce your exposure. Don’t hang around for Hunt to help cut your tax bill, because he probably won’t. So take action yourself today.
