How to Pay Less Tax as a Family – Simple Strategies That Work

Are You Missing Out on Easy Tax Savings?

Many families in the UK unknowingly pay more tax than they need to. With a few simple adjustments, you can reduce your tax bill and keep more of your hard-earned money. Below are four practical and legal ways to minimise your family’s tax burden.

1. Income Splitting for Spouses – Make Your Money Work Smarter

In the UK, spouses and civil partners are taxed separately, which means you can distribute income between you to take advantage of lower tax bands.

🔹How It Works: If one partner earns significantly more than the other, shifting income (through dividends, rental income, or salaries) to the lower-earning spouse can reduce the overall tax bill.

🔹Example: If one spouse earns £60,000 and the other earns £15,000, the higher earner could transfer some assets to the lower earner so that their income falls into the basic tax rate band (20%) instead of being taxed at 40%.

📌 Action Tip:

• Consider transferring income-generating assets to the lower earner to take advantage of the lower tax rate.
• Ensure there’s a proper paper trail for HMRC to approve the transfer.

2. Marriage Allowance – A £252 Tax Saving Most People Miss!

Did you know that if one spouse earns less than £12,570, they can transfer £1,260 of their Personal Allowance to the other spouse if their income is below £50,270? This could cut your tax bill by up to £252 per year.

🔹 Example: If your partner earns £10,000 and you earn £40,000, you could qualify for Marriage Allowance, reducing your tax bill.

📌 Action Tip:

• Check if you qualify and apply online via HMRC – it takes just a few minutes but can save you money every year.
• Claims can be backdated up to four years, meaning you could receive a refund of over £1,000 if you haven’t claimed before.

3. Using Gift Aid to Boost Tax Relief

If you donate to charity, using Gift Aid allows charities to reclaim 25p for every £1 donated. Plus, higher and additional rate taxpayers can claim extra tax relief.

Keep records of all charitable donations and declare them on your tax return to claim back 20%-25% tax relief.

✅ Example:

• If you donate £100 to a charity, they receive £125 thanks to Gift Aid.
• If you’re a 40% taxpayer, you can claim back an additional £25 through your tax return.

📌 Action Tip:

• Keep records of all charitable donations and declare them on your tax return.
• If you’re a higher-rate taxpayer, don’t forget to claim your additional tax relief – it could add up to hundreds of pounds!

4. Tax-Efficient Savings for Children

Want to build wealth for your children while keeping tax bills low? Consider these options:

🔹Junior ISAs (JISAs): Save up to £9,000 per year per child, and any interest earned is completely tax-free.

🔹Lifetime ISAs (LISAs): If your child is over 18, they can open a LISA and get a 25% government bonus on savings up to £4,000 per year (ideal for first homes or retirement).

📌 Action Tip:

• Open tax-free savings accounts for your children before 6 April 2025 to make full use of this year’s allowances.
• If grandparents or family members want to contribute, encourage them to use JISAs for tax-free growth.

Final Thought: Take Action Now!

Tax planning doesn’t have to be complicated, and small changes can add up to big savings. By splitting income, claiming allowances, using Gift Aid, and making tax-efficient savings, you can reduce your tax bill and keep more money in your pocket.

💡 Want to check if you’re making the most of your tax-saving opportunities? Speak to AEL Markhams Ltd or financial advisor today to maximise your savings before the 6 April 2025 tax deadline!