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We all know how annoying it can be to think you’ve got all your taxes out of the way and then get hit with another bill. In the UK, we pay a large variety of taxes every year, and many of these are largely influenced by our lifestyle.
There are many ways to reduce your tax bills legally and save on expenses such as council and road tax. This article will make some suggestions as to how you can save money on your taxes in 2022.
How To Save Money On Taxes In The UK?
Hire An Accountant
The easiest way to save money on your taxes is to ensure you’re doing them correctly. As taxes can get confusing, hiring a qualified tax accountant can be the best way to ensure that all of your finances are handled correctly.
If you run your own business, this is especially important. If you don’t declare your taxes properly, you can fall subject to fines or penalties. Getting a professional to take charge of your finances is an excellent way to ensure you’re not overpaying or missing a tax payment.
Drive An Electric Vehicle
Did you know you can save on road tax by driving an electric vehicle?
Driving a fully electric vehicle will mean you pay no money for road tax as they’re zero-rated! It’s part of the government initiative to encourage drivers to switch to fully electric vehicles and help to reduce their carbon footprint.
In London, electric vehicles also benefit from exemption from the congestion zone charges – this is known as the ‘cleaner vehicles discount’ and is awarded as EVs don’t contribute any CO2 emissions.
If you drive a hybrid vehicle, you will still have to pay road tax but can be awarded discounts if your vehicle runs mainly on electric energy.
With petrol prices on the rise and tax discounts for EVs growing, there has never been a more cost-efficient time to switch to electric vehicles.
Move To An Area With A Lower Council Tax Bracket
Council Tax can be one of the worst extra taxes you have to pay. Getting hit with another large monthly bill can be a real blow if you’re already paying a fortune for rent.
The value of your property usually estimates council tax, so if you own or rent a property worth a lot of money, your council tax will be higher. Council tax is used to put money back into your area; it pays for things such as bin collection, public transport services, police forces, public parks and extra support for vulnerable people.
If you’re open to cutting costs by moving, you could consider moving to an area that charges less for council tax. Sometimes you’ll find an area that is just as nice – if not better than where you’re staying – with a reduced council tax rate. If you’re willing to downsize to a smaller property, it can often save you lots of money on council tax.
Tax-Deductible Expenses
If you’re self-employed or run a business, you can cut your costs by deducting expenses incurred when running the business from your profits, lowering your overall tax. These are known as ‘tax-deductible expenses’ and include things such as phone service costs, wifi, fuel and home-office costs. Identifying tax-deductible expenses will save money in the long run, which you can re-invest into growing your business.
Claim Tax Credits
Tax credits can be useful tools for helping to cut taxes and also offer money to those who may require a boost. As of 2022, most tax credits have been replaced by ‘Universal Credit’ – which you can apply for online. However, there are certain tax-free credits that you can still apply for if you’re eligible.
You can apply for a council tax exemption if you are on universal credit or benefits. You can do this on the UK Government website, which will let you know if you’re eligible.
In 2022 the UK Government announced that a tax-free childcare programme would be rolled out to help eligible families fund childcare. You could receive up to £2,000 a year per child to put towards the cost of their childcare (nursery, after-school club, summer holiday club etc.). This credit is available for children up to 11 or 17 if they have a disability.
Donate To Charity
In the UK, charity donations are tax-free. Try to give back to the community through the Gift Aid scheme, you or the charity can claim the tax back via Gift Aid. It’s a great way to do something good and save money in the bigger picture.
Finally, Monitor Your Finances
This may seem obvious, but the most important way to handle taxes is to know what your incoming and outgoing finances look like each month. If you can find a way to budget your taxes efficiently, they won’t feel like such massive expenses when they come around. You can gradually reduce your tax expenses by employing the above tips, but money management is key to getting the desired results.