9 UK tax saving tips for the cost of living crisis

As if covid weren’t difficult enough, just two years later we’re living through more tough times – an official cost of living crisis. 🙃

Whilst tax isn’t everyone’s favourite domain (especially during these unprecedented times), there are a few ways to make tax work for you instead of being an extra pain in the derrière.

Here are 9 UK tax saving tips for the cost of living crisis!

1. Check your tax code

You’d be surprised how many people are overpaying tax simply due to an incorrect tax code. 

It could take HMRC some time before they realise your tax code is incorrect. So it’s worth giving them a quick call to check yourself.

Underpaying tax is another reason to check your tax code. In a cost of living crisis, paying less tax sounds ever-so appealing. But being hit with a hefty fine due to underpaying is a lot worse.

2. Claim council tax reductions

It’s no secret that council tax has skyrocketed this year (along with pretty much everything else). There are two ways you may be able to save on council tax:

1. Council tax reduction
2. Council tax rebate

The council tax reduction depends on your circumstances. Your bill could be reduced by up to 100% if you’re:

• A low earner (if you earn less than £95 per week)
• Claiming benefits

Other factors taken into account are:

• Where you live
• Your income
• Whether you have any dependents
• Your residency status

Secondly, the council tax rebate came into effect when the UK government was eventually forced to address the cost of living crisis. 

The requirements to receive the £150 rebate is:

• You paid council tax on your main home 1st April
• Your home is in band A-D 

You may also be entitled if you’re:

• A student
• Have severe mental impairment (such as Alzheimer’s or Parkinson’s disease)
• Have an annexe where a dependent relative lives

3. Reclaim tax-free childcare

Childcare is expensive. Point blank. For a child under two to attend nursery every day, parents could easily see themselves paying at least  £200 per week. That’s £800 a month! 

Now if you have two under two… ok, you get the point.

You may be able to claim up to £500 every three months (per child) to help with childcare costs. You claim more if your child has a disability.

🚨 Wait, it doesn’t end there! 🚨

If your child is between 3 and 4, you could also get 30 hours of free childcare.

Your eligibility to apply for either depends on:

• Your income 
• Your partner’s income (if applicable)
• Your child’s age 
• Your immigration status
• Your childcare provider

4. Check you’ve not overpaid taxes ​🤞​

What better feeling than that brown envelope coming through the post stating you’re owed a tax refund? *chef’s kiss*

Overpaying the tax you owe is actually fairly common and could be the result of changing jobs, being out of work for some time, going from an employee to self-employed and many more.

HMRC aren’t always quick to fix their mistakes. Which means tax rebates aren’t always automatic. The best way to find out whether you’re owed a rebate is to check. You can do this here.

5. Utilise your marriage allowance if possible

Now this isn’t applicable for everyone – but if you’re married it’s worth checking.

If you pay tax at the basic rate of 20% and your partner earns less than £12,570 (and doesn’t pay income tax due to this), they may be able to transfer some of their personal allowance to you.

• Your partner can transfer you £1,260 of their personal allowance
• You must be married or in a civil partnership
• You must pay 20% tax; this is not available to those in the higher or additional tax band
• You both have to be born after 1935

All of a sudden, marriage doesn’t sound like a traditional construct designed to uphold the patriarchy anymore, right?😬

We joke. But seriously, the tax benefits can be significant so don’t let them pass you by! 

6. Make use of the starter rate for savings (if applicable)

If you earn less than £17,570, you may be entitled to £5,000 of interest on any savings without having to pay tax on it. This is your starting rate for savings.

Confused? Here’s a quick example:

You earn £12,000 a year working part-time in the local coffee shop. Because your earnings are less than your personal allowance entitlement of £12,570 – you will be able to earn up to £5,000 in interest from savings without paying any tax on it. 

Now you’re probably thinking ‘what if I earn more than the threshold?’

If you earn more than £17,570, you won’t be entitled to the starter rate for savings. If your income is less than this, the following rule applies:

• Every £1 of other income (wages, pension etc) above your personal allowance (£12,570) reduces your starting rate for savings by £1 

7. Claim tax deductible expenses if self-employed

If you’re self-employed, you may be familiar with tax deductions. If not, you’ll want to get familiar!

Claiming allowable expenses will reduce your tax bill. Of course, not everything is expensable so it’s best to check what you can expense – otherwise, you may be unknowingly committing tax fraud.

8. Reduce your taxable income with company perks

Employees may be able to benefit from company perks you didn’t even know existed.

Have you asked your employer if they offer:

9. Meet the self assessment tax return deadline

In a cost of living crisis (or on any other day, to be honest) no-one wants to receive a fine from HMRC. Especially for something that can be easily avoided.

For that reason, if you’re self-employed, 31st January should be the most important day of the year (after your birthday, of course 😌). This is the deadline to file online, but if you’re doing a paper tax return, you have until 31st October. ⏱️

If you’d prefer, TaxScouts can file your tax return on your behalf.
We also have a range of resources available if you want to know more about important dates and deadlines if you’re self employed – start with this guide!