‘Brilliant’ way to cut tax bill by thousands in 2022 – ‘It’s just crazy’

https://www.youtube.com/embed/4ltR9GFutYM

On the IslamicFinanceGuru Youtube channel, charted financial planner Ibrahim Khan explored five ways that people can save thousands on their tax with these “hidden breaks” that many people may not know about.

1 Marriage Allowance
Britons get £12,500 of their earnings tax free, but if someone earns over £50,000 and their spouse or partner doesn’t work or earns less than that amount, they can transfer some of their tax-free allowance to them.

Marriage Allowance allows people to transfer 10 percent of their tax-free Personal Allowance to their partner if they earn more.

This could reduce their tax bill by up to £252 every tax year (April 6 to April 5 the next year).

2 Inheritance tax
The standard inheritance tax rate is 40 percent. It’s only charged on the part of your estate that’s above the tax-free threshold of £325,000.

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

However, those who are legally married can gift each other any amount tax-free.

Furthermore, people can give gifts in their lifetime. If people stay alive for seven years after they give their gift, the gift is out of their estate, and it is tax free.

Mr Khan gave an example: “If you have a £100,000 buy to let property, and you give that away in your lifetime, and you stay alive for seven years after, usually if it had been part of your estate, you would have paid £40,000 in inheritance tax on it.

“But if it’s gifted away before you die and it is not a part of your estate anymore, you will pay zero. Brilliant.”

3 Individual Savings Accounts (ISA)
Mr Khan continued: “A really easy way to save mega bucks is by using an ISA.”

If someone is investing in stocks and shares and they put it into an ISA, they can put up to £20,000 a year in this account and any profits made from then will be tax free.

He added: “Let’s say you set up a stocks and shares ISA and put £20,000 in there, three years later it is worth £100,000.

“Typically, you would have had to pay £16,000 in capitals gains tax because of the profits that you made but because it’s in an ISA you don’t pay anything.”

4 Charity donations
Higher rate and additional rate taxpayers can claim back 20 to 30 percent of any charitable giving as a tax break.

If someone gave £10,000 in a year, they can claim back £2,500 to £3,000 straight back into their pocket.

5 SEIS/EIS Schemes
These schemes can provide “massive tax breaks” for those people who invest in start-up companies.

Under the SEIS scheme, people get 50 percent back of their investment in year one, and under the EIS scheme they get 30 percent back in year one.

Mr Khan gave an example: “If you invested £10,000 under the SEIS scheme, you would get back £5,000 in year one. It’s just crazy.

“I didn’t believe it the first time I heard it but then I tried it and it works.

“There are other benefits as well – no capital gains tax on these shares, that’s 20 percent that you’ve just saved.

“Number two is loss relief. HMRC will actually pay you a little bit in case the company collapses.

“And number three, there is no inheritance tax on these shares.”

Source: Read Full Article