MILLIONS of Brits are set to be hit with higher tax bills this year due to a raft of Budget changes that will hit you in the pocket.
The Chancellor froze tax thresholds until 2030 in her Budget last year, which means millions of workers will be dragged into higher tax bands.
Rachel Reeves also hiked the cost of drinking, smoking and fuel, which will squeeze household finances further this year.
But there are things you can do now to slash your tax bill and keep more of your hard-earned cash.
Here we explain how you can reduce your bill and avoid the tax trap.
Team up with your spouse
If you are married or in a civil partnership then you may be missing out on a key tax loophole.
Every worker has a Personal Allowance, which is the amount of money you can earn every financial year before you need to pay Income Tax.
For the current tax year the Personal Allowance is £12,570.
If you earn less than this amount then you usually don’t have to pay Income Tax.
Marriage Allowance is a special tax rule that lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner.
The perk is free to apply for and can cut your tax bill by up to £252 a year.
Plus, you can also backdate your claim by four years.
To be eligible for it you need to be married or in a civil partnership.
You also have to have an income of less than £12,570 and your partner must pay Income Tax at the basic rate, which means they earn between £12,571 and £50,270.
The fastest way to apply for Marriage Allowance is online.
You should get an email to confirm your application within 24 hours.
Or you can claim Marriage Allowance by post using the MATCF form.
For more information visit gov.uk/apply-marriage-allowance.
How do I check my tax code?
YOU can check your tax code on your personal tax account online, on any payslips or on the HMRC app.
To log in, visit http://www.gov.uk/personal-tax-account.
If you have one, you can also check it on a “Tax Code Notice” letter from HMRC.
Bear in mind that you might need your Government Gateway ID and password to hand to log in.
But if you don’t have this you can use your National Insurance number or postcode and two of the following:
- A valid UK passport
- A UK photocard driving licence issued by the DVLA (or DVA in Northern Ireland)
- A payslip from the last three months or a P60 from your employer for the last tax year
- Details of a tax credit claim if you have made one
- Details from a self assessment tax return (in the last two years) if you made one
- Information held on your credit record if you have one (such as loans, credit cards or mortgages)
Sacrifice your salary
If you are able to cover all of your household bills and have cash left over then you could benefit from salary sacrifice.
This is a way to cut your tax bill and top up your income.
It lets you swap some of your wages for another benefit from your employer, such as a pension contribution, company car or childcare voucher.
As a result, your salary is reduced by the cost of the benefit you choose.
A lower salary means that you pay less income tax and National Insurance.
Your employer may also pay less National Insurance.
Many employers will pass on this saving to their employees by paying it into their pension, which can boost their contributions even more.
But to make best use of this benefit you will need to be quick as the Government announced a major change to salary sacrifice in the Budget.
From April 2029 workers will only be able to use salary sacrifice up to £2,000 a year.
They will need to pay the full rate of National Insurance on any contributions over this threshold.
If you earn between £242 and £967 a week then you will pay National Insurance at a rate of 8%.
But once you earn more than £967 a week, then the rate falls to 2%.
Get paid for work expenses
Another way to slash your tax bill is to claim tax relief on your job expenses.
As a result, you will take home more of your earnings and pay less tax.
To be eligible for the relief you need to spend your own money on things you need for work.
For example, if you wear a uniform to work then you could claim tax back.
You can also claim for work clothes, tools, travel and overnight costs.
You can’t make a claim if your employer gives you the money back for these extra costs.
The amount of relief you will get depends on what you have spent and your tax rate.
For example, if you claim £60 of tax relief and usually pay tax at 20% then you will get £12 back.
To make a claim visit gov.uk/tax-relief-for-employees.
It should take less than ten minutes to apply.
Claim tax relief on your car
If you drive a car or van for work then you may be able to claim tax relief on your mileage.
You can claim 45p tax relief on every mile you do for the first 10,000 miles a year of business journeys.
That means if you travel this distance in a year then you would get £4,500 in tax relief a year.
But if you drive more than 10,000 miles then you can claim 25p tax relief per mile.
You could also get an additional 5p per mile in relief if you carry a passenger.
It’s important to keep a log of how many miles you do to avoid losing track.
Use an app such as driversnote and Fuelio to log the distance you have covered.
To use these apps just download them from the app store and make an account.
Make sure to avoid claiming for any personal mileage that you do, even if you also use your vehicle for business purposes.
The exact amount you will get depends on the number of miles you do, so you won’t receive a fixed sum.
You are also responsible for figuring out how much you use your vehicle for business versus personal journeys and log them.
Keep more of your child benefit
If you earn more than £60,000 a year then you could hold on to more of your child benefit with an under-used trick.
The government pays child benefit to parents or other people who are responsible for bringing up a child.
It is worth £26.05 for the eldest or only child and £17.25 for every additional child you have.
You get this amount if you earn less than £60,000 a year.
But once you earn more than this you need to start paying the benefit back at a rate of 1% for every extra £200 you earn.
Once you earn more than £80,000 the payment disappears entirely.
But you could hang on to more of your child benefit by using a key pension trick.
If your earnings mean you are close to the threshold then you can use your pension contributions or salary sacrifice to reduce your taxable income.
As a result, you would get to keep more of your child benefit.
For example, if you earned £61,000 a year then paying £1,000 into your pension would allow you to keep all of your child benefit.
But as noted above, changes announced in the Budget could limit how much you can use this loophole from April 2029.
You will still be able to use your pension to reduce your income but any pension contributions of more than £2,000 will be subject to National Insurance.
