10 ways to pay less tax

Here are 10 ways to keep the taxman's fingers out of your finances

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Here are 10 ways to keep the taxman's fingers out of your finances...

If you're fed up with reading about celebrities and big businesses avoiding and evading tax then don't worry – there are plenty of ways that you can too.

And while tax evasion is illegal, tax avoidance is sensible. That's especially true if you're avoiding tax via government-sanctioned tax breaks rather than dubiously legal loopholes.

So, to help you protect your pay packet here are 10 ways that you can pay less tax...

Use your ISA

You can save up to £15,240 into your ISA this tax year. If you have any savings, then it makes sense to keep them in an ISA as it stops the taxman from taking a cut of your returns.

A cash ISA works exactly like a normal savings account except the taxman can't touch it. If you already have ISA savings then now's the time to look for a better deal and get transferring that cash into a more competitive account.

You can also save your allowance into a stocks and shares ISA. Although the value of stocks and shares can fall as well as rise, these accounts tend to do better than cash ISAs over the longer term (although that's not set in stone).

Every year a new survey shows that people think ISAs are complicated or will mean they need an accountant – it's not true!

Use childcare vouchers

It's bad enough paying expensive childcare fees, but if you let the taxman stick his hand in your pocket first then you'll end up working all day without earning a penny. If your employer subscribes to this scheme then they can pay you a portion of your salary in childcare vouchers, so you don't pay tax on the fees first.

For example, normally, you have to earn £1,000 to have £700-odd to spend on childcare after taxes and NI. But if you take vouchers instead of pay, you don't pay tax on that amount and have the full £1,000 to spend on childcare.

And don't assume these vouchers only help parents of babies and pre-schoolers. They can often be used on breakfast clubs and afterschool activities, allowing you to avoid tax on lots of different kinds of childcare.

Don't pay NI if you don't have to

You don't need to pay National Insurance contributions once you've reached state retirement age, but it's easy to forget that if you're still working.

Rent a room

Did you know you can earn up to £4,250 a year entirely tax free? Under the Rent a room scheme, you can let out a furnished room in your home to a lodger and earn thousands a year tax free. You don't even need to tell the taxman unless you start to earn more than £4,250 a year.

That's more than £350 a month that the taxman can't touch.

Use Gift Aid

It's not just you that can benefit from cutting your tax bill; your favourite charities can too. If you're a UK taxpayer and you fill out a Gift Aid form on any donations, the charity can claim your 20% basic rate tax back – your £10 donation becomes £12.50 for the charity.

If you're a higher-rate taxpayer, you can claim back the additional tax when you fill out your tax return. What's not to like?

Pay into a pension

Not only does saving for your old age make a lot of sense, it will save you a bucket of tax too. Pension contributions qualify for tax relief on savings up to £50,000 a year. So, whatever you save, you'll get the tax back, helping you build a tax-free nest egg for your retirement.

Use your partner

As of the new financial tax year, married coupes can transfer up to £1,060 of their personal tax allowance from 2015, to recognise the 'special' status of marriage. That means they can save up to £212 a year.

However, you can also do that by transferring savings and investments to your partner if they pay a lower rate of tax or haven't used up their full personal tax allowance.

It's worth getting legal advice when making large gifts, as you will be losing control of those savings and assets.

Live healthier

The government levies so-called 'sin taxes' against stuff it wants to discourage, like booze, cigs and petrol. So, if you can give up the bad stuff and get walking more then you'll pay considerably less tax. Boring but true.

Check your tax code

It's entirely possible that you are overpaying tax every single year because you're on the wrong tax code. In fact, it's frighteningly possible; accountancy firm UHY Hacker Young claims that as many as one in three taxpayers are using the wrong code.

Even worse than overpaying is underpaying, however, as you can suddenly be hit with a huge unexpected bill. Check your tax code is right via the HMRC website. http://www.hmrc.gov.uk/incometax/codes-basics.htm

Keep the taxman away from your kids

It's not just your finances need protecting, your children's do too. Keep the taxman away from your kids' Christmas money by paying it into a Junior ISA, which will become a standard ISA when they turn 18.

Alternatively, you can save into a standard children's account and not pay tax, as long as your child isn't earning more than the tax-free allowance (which at £10,600 this year, most won't be!).

How far is too far when it comes to avoiding tax? Have your say using the comments below.

Read more on AOL Money

Benefits cheats vs tax dodgers: who's worse?

Brits to waste £1.3 billion in ISA tax savings

Pension pot raiders could face massive tax bills

Celebrities caught out by a tax bill

Celebrities caught out by a tax bill


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