While living costs remain high and disposable incomes dwindle, many people may be searching for ways to retain as much of their money as possible. There are a few tax allowances available to claim to do this, which TikTok content creator Cameron, who goes by the name Cazzatime, says some people may not be aware of.
Diving into a few allowances in a recent video he posted on the social media platform, Cameron said: “Five tax loopholes that can save you money on tax that you might not know about.
“You have a £1,000 trading allowance. This allows you to earn up to £1,000 per year from any side income without having to pay any tax or even telling HMRC.”
Secondly, Cameron said: “You have a £20,000 ISA allowance. This allows you to save or invest up to £20,000 per year through various accounts, and any profits that you earn are completely tax-free.”
Individual Savings Accounts (ISAs) are a popular savings option amongst Britons, as these accounts enable people’s money to grow without having to pay tax on the interest above the Personal Savings Allowance (PSA).
They’ve become particularly popular over the past year while savings interest rates have been reaching some of the highest levels in decades.
However, some ISAs can come with a few more restrictions, like penalty charges for early access or transfers, making it key to be aware of the account details before investing.
Additionally, Cameron noted: “You have a £9,000 junior ISA allowance. This allows you to save or invest up to £9,000 per year on behalf of your child. Any profits earned are completely tax-free and your child will gain access to the funds when they turn 18.”
Moving onto the fourth “loophole”, Cameron said: “You have a £4,000 lifetime ISA allowance. This allows you to save or invest up to £4,000 per year, which can be withdrawn tax-free to buy a first home or for retirement.
“But the best part is that for everything that you save in the account, the Government will top it up with a 25 percent bonus.”
There are, however, strict guidelines savers must follow to receive the bonus and avoid a penalty.
For example, at present, withdrawals can only be made to purchase a qualifying first house up to the value of £450,000, or for retirement after the age of 60. Otherwise, a 25 percent Government penalty is applied.
Moving onto the final tip, Cameron said: “The rent-a-room scheme. This scheme allows you to earn up to £7,500 per year tax-free by renting out a furnished room in your own home.”
The allowance is halved if people share the income with their partner or someone else.
The tax exemption is automatic for people who earn less than £7,500, meaning they do not need to do anything to benefit from the allowance.
Those who earn more must fill out a self assessment tax return. However, they can opt into the scheme and claim their tax-free allowance. More information can be found about this here.
