Skip navigation

Gloucestershire Business News

How to 'earn' more than £40k tax free - Rob Stokes of Optimum

By Rob Stokes, head of Accounts & Audit at Optimum Professional Services 

Did you know, there is a way you can 'earn' more than £40,000 tax free?

This is by taking advantage of the various annual tax-free allowances the Treasury offers, writes Rob Stokes, head of Accounts & Audit at Optimum Professional Services. 

Some of these you may be benefiting from already, but there may be others you didn't know about and would like to take advantage of. Here are more details.

Personal allowance: everyone has a personal allowance that they earn tax free, and currently this is up to £12,570.

If you are a shareholder, you can earn £2,000 tax free from dividends.

Rent-a-room-relief is available at a rate of £7,500 per year, where you rent a room in your home.

If you let out land or buildings, that don't fall under rent-a-room relief, you can get property income allowance of £1,000 (for example, you might rent out driveway space).

If you sell an asset that is liable to Capital Gains Tax, you have an annual allowance of £12,300 and any gain up to that point will be tax free.

You can earn £1,000 interest on savings, tax-free, called a personal savings allowance (this drops to £500 if you are a higher rate tax payer). This doesn't include your cash ISA or stocks and shares ISA allowances, which are already tax free.

If your taxable income is low, you can earn an additional £5,000 in tax-free interest as a starting savings rate.

You can claim up to £1,000 tax-free traders' allowance, if, for example, you run a small self-employed business selling goods on eBay.

Another one to remember is the Marriage Allowance, which could bring in an extra £252 per year in reduced tax. Here, you (or your spouse) transfers £1,260 of personal allowance to the other spouse (that can be husband, wife or civil partner). To benefit, the person receiving the transfer must be earning less than their personal allowance.

Totalled up, this comes to £43,630. With inflation going up and interest rates looking set to rise too, and all the pressure this puts on the household income, taking advantage of tax-free allowances is well worth looking into.

To talk to Rob Stokes and Optimum Professional Services about tax planning and accountancy email rstokes@optps.co.uk, call 01242 384936 or visit https://www.optps.co.uk/.

Related Articles

E:80 Punchline Talks! With Chris Nelson, Dr Polly Pick, Alisdair Garbutt and Simon Pigott Image

E:80 Punchline Talks! With Chris Nelson, Dr Polly Pick, Alisdair Garbutt and Simon Pigott

Punchline-Gloucester.com editor Mark Owen is joined by leading Gloucestershire business figures.

E79 Punchline Talks! With Rachel Geliamassi, Jonathan Viney, Dorian Wragg and Tara Vaughan Image

E79 Punchline Talks! With Rachel Geliamassi, Jonathan Viney, Dorian Wragg and Tara Vaughan

E79 Punchline Talks! With Rachel Geliamassi, Jonathan Viney, Dorian Wragg and Tara Vaughan

Punchline Talks! The B!G Interview with Jim Grant CEO & Principal of Cirencester College Image

Punchline Talks! The B!G Interview with Jim Grant CEO & Principal of Cirencester College

Punchline Talks! The B!G Interview with Jim Grant CEO & Principal of Cirencester College.

Has the property market boiled over? Enzo Mora of The Mortgage Brain Image

Has the property market boiled over? Enzo Mora of The Mortgage Brain

Everything's a hot topic at present and it's not just the weather! Enzo Mora CEO and founder of The Mortgage Brain tests the temperature of the housing market.

Copyright 2022 Moose Partnership Ltd. All rights reserved. Reproduction of any content is strictly forbidden without prior permission.