Tax Allowances – Use them or lose them!

Basic personal allowance

Most of the people paying income tax in the UK are allowed to receive a certain amount of income before having to pay income tax. In 2019-20, the basic personal allowance is £12,500. The allowance begins to reduce if your taxable income is more than £100,000 and disappears altogether at an income level of £125,000.

Marriage allowance

You can transfer £1,250 of your unused personal allowance to your spouse or civil partner if they earn more than you, provided they pay only basic-rate income tax.  This can save £250 in tax between you.

Personal savings allowance

Basic-rate taxpayers can receive up to £1,000 in savings interest free of tax in 2019-20.  This allowance is halved to £500 for higher-rate taxpayers.

Dividend allowance

The first £2,000 of dividend income is tax-free.  This dividend allowance is available to everyone, irrespective of your level of income.

Blind person’s allowance

If you or your spouse or registered civil partner are blind or have severely impaired sight, your personal tax allowance is increased. If you are both eligible, you’ll each get the allowance. In 2019-20, the additional allowance is £2,450.

Trading and property allowances

Each year, you can receive up to £1,000 from property or trading free of tax. These allowances are particularly useful for low-level activity in trading online or providing services or the occasional renting out of your property.

All the above allowances are available every year, but if you don’t use them, you lose them.

If you run a business and/or have property investments, are you making the most of the opportunities to reduce the tax you pay on your income ?