Money expert shares £2,000 in HMRC allowances Brits forget about
Some may only have until the end of March to claim their allowances
A finance expert has warned that Brits could be leaving thousands on the table simply by not claiming their tax allowances. The average person could be missing out on nearly £2,000 before the start of the next tax year in April, according to Psyfi money experts. While some allowances are automatic, taxpayers need to take action on others in order to optimise their bills.
Amid the cost of living crisis, this is money many families can’t afford to let go. Michele Tieghi, Financial Expert and Founder of psyfi money, highlighted a few of the most common HMRC allowances that people might be letting slip through their fingers. She explained: “We’re about to head into the colder months of the year, when bills will become more expensive. Being more tax-wise could help Brits offset these hefty costs. It isn’t too late to become more tax-smart.”
Marriage Allowance
Maximum saving: £252
People who are married or in a civil partnership could be clawing back hundreds from HMRC each year thanks to the marriage tax allowance. This rule allows people to transfer any unused personal allowance to their partner but it only works if one person is earning less than £12,570.
Everyone in the UK with an income below £100,00 has a £12,570 personal allowance which they can earn tax-free each year. However, if you’re in a marriage where one partner isn’t using their full personal allowance, they can transfer part of it to their spouse.
This allows the higher-income partner to bring home more of their salary tax-free.
Personal Savings Allowance
Maximum saving: £200
Every person who earns under £125,140 has a personal savings allowance, which is not the same as their personal allowance. This tax allowance lets people earn up to a certain amount of interest on their savings before applying tax.
The allowance differs depending on your income, basic rate taxpayers have a £1,000 allowance while higher rate taxpayers have only £500. This is the amount of interest they can earn without paying tax, not the total amount they can have in savings.
People in the additional rate tax don’t get any personal savings allowance, meaning all of the interest they earn on their savings is taxed unless it’s in a tax-free account like an ISA.
ISA allowances
Maximum saving: £130 - £520
ISAs are tax-free savings accounts, allowing people to avoid paying tax on interest, dividends or capital gains, even if it goes over their savings allowance. Thereby maximising their savings or investments and how much they earn from both.
Currently, people are allowed to deposit up to £20,000 per year in one account. People maxing out this limit on cash savings could save up to £260 depending on their savings allowance and tax band. However, those with stocks and shares ISAs could save hundreds more depending on how well their investments do.
The £20,000 limit for cash ISAs is also being changed next year to £12,000, which could leave savers facing more tax charges on their savings unless they plan accordingly.
Capital Gains Tax Allowance
Maximum saving: £540 - £720
The expert shared: “The Capital Gains Tax Allowance allows you to make a profit of up to £3,000 tax-free from selling investments. This includes shares, or property (not your main home). Any assets sold outside of this allowance are subject to an 18 per cent tax for basic rate taxpayers, and 24 per cent for those in the higher rate bracket. Based on £3,000, this would be £540 or £720.”
