The opportunities to save tax have just become even more complicated, so much so that even the Inland Revenue Software cannot cope with all the changes!

That having been said, it is actually possible to save tax on income of over £32,000 in certain circumstances as the example at the end will show.

Apart from the personal allowance of £11,500 there are a variety of other opportunities to consider.

1) Dividend Allowance

A reminder that the tax-free amount remains at £5000 pa for each shareholder which encourages the use of a company.

2) Starting Rate of Savings

This is a further £5000 on savings income that effectively brings the tax free amount up to £16,500 with the personal allowance. However, one would need earnings, rental income or similar of little more than £11,500 as the £5000 is only available on the next £5000 above the £11,500

3) Savings Allowance

This is a further £1000 relating to savings income over and above the personal allowance and savings allowance above. It is restricted if the total income exceeds the higher rate threshold.

4) Rent a Room

This if for owner occupiers who take in a lodger and receive up to £7,500 p.a.

5) Trading Allowance

This relates to small amounts of trading income up to £1000

6) Rental Allowance

As for 5 above but re rents as opposed to trading.

7) Transferable Tax Allowances

A spouse or civil partner can elect to sacrifice 10% of his or hers tax free allowance (e.g. £1150) if doing so doesn’t take them out of the basic tax band

8) Capital Gains Tax Exemption

With a rising stock market it may be worth utilising the annual exemption of £11,300

9) ‘Old’ Married Couples Allowance

One spouse needs to have been born before 6th April 1935

10) Enterprise Investment Scheme and Seed Enterprise Investment Scheme

An investment if suitable into an EIS or a SEIS can reduce income tax by 30% and 50% respectively as well as deferring a capital gain.

Example to Save Tax

State Pension £125 per week                                                                                      9,100
Private Pension £200 per month                                                                              2,400
Sub Total                                                                                                                       11,500 

Bank Interest                                                                                                                 6,000 (2 & 3 above)

Dividend Interest                                                                                                          5,000 ( 1 above)
Sub Total                                                                                                                       22,500

Rent a Room                                                                                                                  7,500 (4 above)

Access Past Home                                                                                                         1,000 (6 above)

Casual Work                                                                                                                   1,000 (5 above)

Total Possible Savings                                                                                               32,000

So Mr Tax Efficient received £32,000 and paid NO Tax!

NB. If no 7 is relevant the saving could be more!

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