WILL we end up paying more for fuel, booze and fags next week – or lose a bigger slice of our paycheck?
Families will find out on Wednesday when Chancellor Rishi Sunak delivers his first Budget.
The average worker pays £9,000 a year across five types of tax.
But that figure soars after major life events such as moving home and the death of a relative.
Here, I explain how to cut your tax bills, whatever Wednesday’s outcome.
THIS is the biggest tax for most workers, with those on an average full-time salary of £30,000 paying more than £3,000 in income tax per year.
Most pay the “basic rate” of 20 per cent up to £50,000 after the personal allowance of £12,500. Higher earners pay 40 per cent on anything from £50,001, then 45 per cent above £150,000.
Here are a few ways to cut tax or get some back.
- Pay more of your salary into your pension, since you don’t pay tax on pension contributions.You won’t get access to the cash until you are older but you stop Rishi taking it. This “tax relief” means that for every £100 you stick in the pension pot, you effectively pay in £80 as a basic-rate taxpayer. You pay in just £60 if on the higher rate and if you are on the big bucks, just £55.
- Married couples can get a tax perk worth £250 a year if one of them is a low earner.If they earn less than the £12,500 tax-free allowance, they can pass some of the allowance along to the other, so long as they earn under £50,000. Yet many eligible couples don’t do this.
- Self-employed people can deduct costs for a raft of expenses from their tax bill. For a builder, this could mean work boots, a hat and protective gear — and a van, insurance and fuel. Those who work at home may be able to claim phone costs.
- Even those with a job can get tax relief on a few work costs, such as repairing or replacing uniforms or tools — but not on buying them in the first place. For example, spend £60 on replacement safety boots and get £12 back.
COUNCIL tax bills arrive soon and will, on average, work out £69 higher than last year’s.
Discounts are available to students, those who live alone, disabled people, families on low wages and anyone living with someone with a “severe mental impairment” such as Alzheimer’s or a learning disability. But many people eligible for help don’t claim.
Furthermore, some 400,000 homes are thought to be in the wrong “band”, represented by a letter from A to H based on assumed capital values in the early Nineties.
Some families overpay by hundreds a year but you can claim a rebate dating back to when the tax was launched in 1993. One family got a refund of £8,000.
DRIVERS face car tax, fuel duty and Rishi taking a slice of insurance costs too.
Those with an old banger — often the poorest families — are hit hardest. Older, less efficient cars have the highest tax and use the most fuel, half of which goes into Treasury coffers. In places such as London, motorists face “toxicity” charges too.
Electric vehicles are cheaper to run but cost more to buy or lease, though prices are getting closer to petrol or diesel cars.
A used 2015 Renault Zoe electric car is £7,680 and a similar petrol or diesel Ford Fiesta £7,145, according to CarGurus.
Many can’t afford to buy one now but could go electric next time they switch.
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On these vehicles there is no car tax, which can be as high as £570 a year, and power is far cheaper than fuel.
More than half the cost of a tank of petrol or diesel is tax, which is tipped to rise.
If you don’t drive much, you can avoid road and insurance tax by using a car-sharing club such as Turo or Getaround.
HOW TO BE FREE OF VAT
VALUE added tax is added to what the Government deems “non-essential” items – although there are bizarre rules on what falls into this category.
But if you follow our tips and are aware of the quirks below, you can avoid being clobbered by VAT.
- Make your own smoothies. Raw fruit is not subject to VAT, but it is when pulped and sold in a bottle.
- VAT is charged on chocolate-covered biscuits but not plain ones or chocolate-covered cakes. So it is not added to Jaffa Cakes but is on to chocolate digestives. Gingerbread men can have two chocolate eyes . . . but add a chocolate belt or buttons and you pay tax.
- Don’t buy potato crisps, which are taxed, while tortilla chips, Twiglets and prawn crackers and vegetable crisps are zero-rated.
- Raw nuts are zero-rated, as are roasted and salted nuts still in their shells. If they are shelled and either roasted or salted, there is VAT to pay. Dried fruit in the baking aisle is exempt but not in snack packets.
- Warm pasties and sausage rolls baked onsite and sold while cooling down – even if they are still hot – are zero-rated, whereas any other hot takeaway food is subject to VAT.
- Books, children’s clothes and magazine subscriptions have no added tax.
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