LEGITIMATE ways to REDUCE your UK TAX bill in 2020 - How to pay less tax every year

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there's only a few things are certain in

the uk and one of them

is paying taxes but in this video today

i'm going to share with you 14 ways

you can legally reduce your tax bill in


and beyond

hi there welcome back to the mammoth

channel my name is janifer so today's

video is especially important if you're

looking to be savvy with your money now

i will say of course i

absolutely encourage everyone to pay the

right amount of tax but what if there

was some

ways that you could actually maximize

money staying in your pocket

so you can use it to do great things

such as invest

give to others and that's what i'm going

to explore in this video in particular

how can we legally reduce our tax bill

whilst also keeping

money in our pocket and doing great

things with it i think you're really

going to enjoy these 14 ways

that i'm going to share with you now and

if you haven't yet already

please do hit subscribe button because i

do talk about personal finance

investing and success mindset on my

videos and i think you're going to


enjoy the wealth of knowledge that

you'll get for your money and doing

things differently in future

so the first way to legally reduce your

tax bill it seems such an obvious one

but please always check every single

year that you're actually paying the

right amount of tax

particularly if you work for someone


so i actually have worked in the sales

division of many companies over my

working life and there's a very specific

reason why i actually suggest this

being a sales rep or if you're anyway

bonus related with your job and career

you have to make sure that you're not

being taxed in extra higher brackets

by default by your employer without

realizing for example if you do get a


bonus maybe once a month or once every

six months that can really skew your

average tax that they will take from you

because remember it's not somebody

looking at your particular scenario

making sure you're paying the right tax

they're just making an approximation to

keep on your behalf and pay the tax man

so if you're someone who does get

bonuses in any way from your employer

or simply you just want to consistently

check that you're paying the right

amount every single year

on behalf to the tax man please do think

about having a self-assessment every

single year

you don't need to be self-employed you

don't need to have side hustles to

register to be self-assessment you

simply go on the hmrc website

fill out a form and ask to be

self-assessed every year even if you

have an employee who pays your tax

hopefully in the background

use your p 60 every single year put in

the amounts that you're paying in tax

and it will check for you if you're due

back any tax payments

a great way to ensure you're always

paying the right tax

and keeping more in your pocket the next

way to reduce your tax bill is to ensure

you have the right tax code assigned to


so particularly important again if you

work for someone else you must check

on your pay slip what is the code they

have listed as your tax code every year

now the default tends to be 1250

l now the l abbreviation means that you

have 12 and a half thousand pounds

personal allowance before you should be

taxed and that's pretty much the


abbreviation that most people will

receive however you must check that tax

code every single year

because a couple of things could change

the first thing that could be there is

you may be changed how you're paying tax

and i'll cover a few specific examples

in a little short while you then could

have changed

tax brackets as well from one year to

the next so making sure you're not being

taxed at the higher rate by default and

they have to consider you've maybe got

additional benefits benefits and kind

and such that would be tax exempt so

usually the last

letter of your code will describe which

particular tax bracket you fall under

for example if you have the letter m

after your tax code

it actually means you've received a

marriage allowance from your other half

if you have n after your tax code it

means you've given

someone a marriage allowance so a part

of your tax free allowance

you've given to someone else who is

earning less and you that you're in a

civil partnership

or married to the other things that you

might see is a letter s

that means you're based in scotland so

we have different tax laws up here so we

pay tax in different rates and at

different times of salaries

the other letter you might see is a

letter c which means it applies to welsh


so that's another way that you can check

are you paying the right amount and then

the numbers

will usually denote how much of a tax

allowance you have so the most common

one as i've said

is 1250. if you have anything different

that would suggest that you have a


personal allowance amount based on maybe

charity contributions

or something of that nature or the

switching to a spouse

or someone in a civil partnership

another very common way to save on tax

is simply by paying more

into your pension every single year so

did you know we have

up to 40 000 pounds that we can pay in

individually into our pensions every

single year before we then experience

any tax now obviously it's on your gross


so the government will either top up

your net pay payments that you've made

to your pension

or they'll simply take it from your

gross pay from your employer right away

now that means if you're someone who's a

high taxpayer you could be receiving an


41 even 45 on top

of your payments as a way of actually

investing in your future

and it's a great way to simply build up

that income for when you do want to

retire with your private pension so

whether that be 55 or 67 whatever it

needs to be you're allowing yourself to


huge chunks of money direct from your

wage every single month towards that

great goal

of eventually being able to retire with

that lump sum of having an income

outside of your day job now you can also

have different flavors where you can

have private pensions so not only can

you have employer pensions

where they might even give you free

contributions on top of your actual

individual contributions so free money

as well towards your pension you also

have the option to open

private pensions in the uk so you can

have multiple ones of them as long as

you're not putting in more than 40

000 pounds per year into the total

amount before then you'd be taxed

so make sure in particular if you've not

got any form of investments

any form of planning for your future and

later years

make sure you're taking advantage of

your pension tax free contributions

now obviously you will pay tax when you

actually withdraw money

but why not keep more of your money in

your hands for your future

to build up that pot size right now now

another place that you might not realize

you can save

tax money is uncharitable contributions

so make sure you're keeping a note

particularly every month if you're

giving to causes you believe in

perhaps even as part of my money stacks

method where we commit hopefully

to five or ten percent every single

month to giving to things that we

believe in

and causes that mean something to us as

a way of managing our money

if you are giving in any form please do

keep a record of it the reason being if

you're actually filling out that


checking your tax every single year as

default whether you're self-employed or

simply employed by someone else and want

to check your tax

you can include your charity


and they will be topped up as if they

were tax-free

so not only can you be making more

contributions you're making them

tax free as well to the charity if you

have already been a taxpayer

and paying tax to the uk government now

this is especially important if you're a

high taxpayer you're paying into your


if you're doing more good things with

your money then you allow

those charities to get even more money

from your contributions

and it'd be a really great thing if you

know that not only you're giving up some

money from your net pay

you're also then making it effectively

from your gross pay on top

so make sure you keep a note of all your

charter contributions

and fill it out on a self-assessment now

the next way that you can save money

on tax legally is actually making sure

you're claiming all your

taxable expenses now if you work for

someone else

there's limited amounts you can claim

but you can still claim

particularly if you work from home or

you have clothing costs or items that

you must buy

in order to do your job you can keep

track of them

and again fill out a couple of forms on

the hmrc website

or that self-assessment and they will be

included as

free items so you get your tax back on

what you've used to actually pay for

those items

if you have a limited company or you're

a sole trader

whether that be a side hustle or your

full-time job you

absolutely can claim for any expenses

through your business

that allow your business to function and

for you to develop as a person

so think about looking into ways that

you can actually claim

tax-free expenses make sure they're

relevant obviously to your business

but that could be a way that you can

make sure your business is growing and


tax free as well you absolutely have to

check what expenses are allowable

of course there's very specific details

before it can be claimed as tax-free but

make sure you keep a note of everything

that you're using to support your


or being able to work from home in some

cases keep a note and then put it

towards your self-assessment to be


another way to make sure you're paying

less tax every year is make sure you're

using up your free

personal allowance the 12 and a half

thousand pounds per year

if it's some opportunity that you have

even to have a business on the side

you can even have an additional 500 up

to 1 000 pounds

that you can make before you start

paying tax on that side hustle as well

so if you are thinking about getting

back into employment

that's certainly a great amount of money

that you could start to earn 12 and a

half thousand pounds

before tax kicks in the next way you can

save money on your tax bill

is making sure that you're not actually

entitled to any tax credits in any way

so a lot of people don't realize that

they qualify for working tax credit

and also child benefit there's different

parameters where you can effectively get

some of your tax

back through qualifying through the

certain hours that you're actually

working so in particular please do check

if you have a family or you're working a

limited amount of hours and you have a

certain wage

check on the hmrc website and the

government website to make sure that you

don't qualify

for some of your tax back another way to

keep more of tax in your pocket

to go to other areas for your household

particularly important

if you have disabilities or low incomes

make sure you're up to date with all the

benefits that you could be entitled to

based on your working hours and the

amount of money you earn

another way you could benefit from lower

tax is actually if you're married or in

a civil partnership

now this is where on a marriage

allowance can be transferred between


so if your partner earns less than you

by a considerable amount

you could obviously check if you're

eligible for the marriage allowance


now basically it means that you give up

about a thousand pounds

to your partner of your personal

allowance it allows them to earn up to

1 250 pounds on top of their personal


before then they hit additional taxes to

be paid

so for you if you are a high taxpayer or

a basic taxpayer of up to 20

or more then you could move some of your

allocation to your partner therefore

saving you about 250 pounds off your tax

bill every single year

through switching some of your

allocation to your partner

again make sure you check the hmrc

website for all the criteria before you

can make that happen

but that could be a way you keep a small

extra amount of money from the tax bill

in your pockets in your household the

next key place that you can save a lot

of tax money every single year is to do

with your investments and your savings

so if you haven't already heard of isa's


saving accounts the uk government have

allowed us

up to 20 000 pounds per person everyone

over the age of 18

you get this allocation every single

year to save

or invest in various flavors of a saving

account that allows you to not be taxed

on any growth any interest or any

increase that you make on those accounts

every year

if you go above 20 000 pounds deposited

into those accounts every year then then

you face some tax

now the current allowance as i said is

20 000 pounds for 2020 to 2021.

it's been about this mark for a number

of years now so that's certainly a great

amount of money

individually and even in a household you

can save up to forty

thousand pounds as a couple obviously

twenty thousand pounds each

and i would really say look into an isa

if you

haven't got one in your portfolio as the

first step the reason

i love them is because it allows you to

invest 20 000 pounds in an investment or

sometimes known as a stocks and shares

isa as well investing in the stock

market and then you don't need to pay

any capital gains any dividend tax

on profits on growth that you experience

if you are looking to invest especially

you want to do this as tax

efficient as possible please do check


investment isis and use them to actually

build your building blocks of your


think about how you can invest as i said

it's up to 1.6 k

every single month per adult through an

investment isa that you can invest

it's a great way to potentially even

retire early with a portfolio

because very quickly those numbers can

grow from just 20

000 pounds one year keep adding on you

could very soon be very wealthy

and not have to pay any tax on the input

or on the way out unlike any other

flavor of savings completely different

from a pension and a normal savings

account now in particular if you want to

know more about investment items

i have a video that talks about how to

actually open one using vanguard on this

channel so please do check it out

and also i've got various videos about

the stock market that you can learn how

to actually invest

what to pick what all the terms mean so

please do have a binge watch

after this video on some of my other

content the next place that you can save

a lot of money particularly if you are

an investor if you've maxed out

your investment isa allocation every

year which is a great amount so well

done if you are in that position

remember also on top of that as an


you're allowed a dividend allowance of

up to two thousand pounds

per year tax free so that means anytime

you get a dividend payout

outside of an investment isa so in a

general investing account

you can make as we say about 150 160


per month tax free anything above that

then you need to pay dividend tax

accordingly now that amount could be a

nice little couple of bills

paid for in your house on top of your

investment isa

so never overlook that if you are

considering maximizing

the efficiency of your tax through your


now the interesting fact about dividend

tax as well it was actually reduced in

amount recently in the past couple of


i think it was closer to about eight or

nine thousand pounds it used to be so

it's down to 2k

now allowance before you have to pay tax

so bear that in mind if you have been

someone who's been paying tax

paying it for many years on your

dividends be aware that the threshold

has gone down in recent years

and along those lines again the next way

you can be tax efficient with


is through capital gains tax now you

might not realize but in 2020 to 2021

we actually individually have an

allowance on capital gains

of 12.3 k per person so as a couple that

moves obviously to 24.6 k

per couple for any joint assets as well

now what does this mean

well that means anytime you have

investments that you plan on selling

during this year

so that could be antiques it could be

stocks and shares

outside of our investment isa which is

obviously different but anything

where you've had growth on what you

bought it for

compared to the selling price you're

allowed a difference of

12.3 k before then on top of that you

have to start paying

tax accordingly now that means the

growth experienced

was 12.3 k as a maximum so if you bought


at 20 000 pounds and then sold it for 25

then obviously that only means it's 5k

different so you're well within the


so this can mean if you're selling items


heirlooms this is another way that you

can actually make it tax efficient for


be within that allowance and again you

won't have to pay

tax in the uk for that level of capital


now especially important with capital

gains it's a yearly amount

so if you do not spend or save that full

12.3 per person

you can't carry it forward into other

years you have to use your allocation

in that year so bear that in mind if you

are making any decisions

don't simply hope to gather it up for

further years and then that's one lump


it has to be within the same year now

another way to be tax efficient

particularly important if you're a


a caregiver or even a grandparent and

that is using

junior isis now i've talked about isis

in terms of adult ones but did you know

that there's actually junior flavors so

anyone under the age of 18

can have a junior isa opened on their

behalf now a couple of things that are

really important to understand

in 2020 to 2021 the tax allowance for

our junior isa

effectively nearly doubled it's now 9

000 pounds per

child that you can save or invest

tax free per year so if you are someone

who is a parent god

parent any of those capacities where you

want to gift money to a child

really say to you think about opening

one of these isa flavors

for your dependent the reason being they

have investment flavors as well

so with a normal icer if it's a junior


basically you can pay into as a parent

or a guardian or as a friend into that


the child will not have access until

they're 18. so understand that is locked


until they're 18. when they're 18 it

then transfers to their name they can

either take the money out we hope not

we'll hopefully encourage them to keep

saving or investing

or they can convert it to a normal cash

isa or an investment isa in their name

so if you started actually putting money

aside for your child

from birth in one of these tax-free and

that can even be you know 700 pounds

every single

month you could be putting away per

child that could be a really nice sum of

money by the time they hit 18

or even 21 to kickstart their education

their first home their first car the

choices would be limitless

and the great thing is as i've said

there's investment options as well you

can have investment isis so just in the

same way you open up an

adult investment isa you can then buy


and funds and index funds for your child

as well

a fantastic way to tax reinvest

for your loved ones and their future now

in the past years

this amount was actually down closer to

4 000 pounds per child so if you are a

parent or somebody who has a loved one

in that way

please do consider it for their future

they're a really great starting tool

for their financial journey ahead and as

i say it's tax-free

up to nine thousand pounds at the moment

and we don't really see that amount


anytime soon now another way to be tax

efficient with investing

is if you have the option for company

share purchase schemes

some companies offer this and if you are

an employee

typically you get the shares at reduced

cost price

you then maybe have to commit to holding

them for one five or ten years

but the whole point is they will

effectively offer these shares out of

your gross

pay so that means you're not paying tax

however there is a caveat

you will have to pay capital gains when

you go to sale the shares so keep that

in mind

but again this could be another

fantastic way of you actually investing

money in your company and it shares in

its corporation

that allows you to grow your portfolio

as long as you support your company and

you believe in them long term another

way to grow your portfolio

benefit from tax reinvesting as long as

you understand you will need to pay

capital gains when you eventually sell


so thank you so much for watching

today's video if you are interested in

being efficient with your money you're

in the right place for the uk in

particular so if you haven't already

please do give this video a thumbs up

all helps somebody else find it in the

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love if you'd hit subscribe

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channel we cover everything

about personal finance investing and

success mindset i'd love to help you

with your budgeting investing in any way

i can to hit financial freedom

financial independence and just design

life on your terms of money to fund it

so please do have a very good watch of

some of my other videos i think you'd

enjoy the channel pretend if you're new

to the stock market

or some of the different terms i've

mentioned stick around and check out my

other videos

so thank you so much for watching i'll

see you very soon