UK residents could be missing out on up to £50 billion from now until the end of the tax year by not using allowances they are entitled to, according to research cited by financial expert Michele Tieghi, Founder of psyfi money. The average Brit could miss out on up to £2,000 from now until the end of March, even at this stage in the tax year.
Tieghi has revealed five tax-free allowances that there is still time to take advantage of, and how much they could save. The allowances cover ISAs, capital gains, dividends, personal savings, and marriage.
ISA Allowance: Save up to £520
The ISA Allowance lets you put up to £20,000 per tax year into Cash, Stocks & Shares ISAs, or a mix. You pay no tax on interest, dividends, or capital gains. For example, putting £20,000 into a Cash ISA with a five per cent interest rate would earn around £650 tax-free by the end of the tax year. Normally, this would be subject to 20 per cent tax (£130) for basic rate taxpayers, or 40 per cent tax (£260) for higher rate taxpayers.
For Stocks & Shares ISAs, putting £20,000 in with an average return of 10 per cent would earn £1,300 by the end of March. Basic rate taxpayers would save £260, while higher rate taxpayers would save £520. Note that the ISA allowance will reduce to £12,000 for individuals under 65 from April 6, 2027.
Capital Gains Tax and Dividend Allowances
The Capital Gains Tax Allowance lets you make a profit of up to £3,000 tax-free from selling investments, including shares or property (not your main home). Assets sold outside this allowance are taxed at 18 per cent for basic rate taxpayers and 24 per cent for higher rate taxpayers, which would be £540 or £720 on £3,000. Low-cost index funds or ETFs are suggested as a low-risk option, and this could offset the future ISA allowance reduction.
The Dividend Allowance gives you up to £500 in tax-free dividends each year if you hold shares. Tax on dividends depends on your income band: 10.75 per cent for basic rate, 35.75 per cent for higher rate, and 39.35 per cent for additional rate. This works out to £53.75, £178.75, and £196.75 respectively.
Personal Savings and Marriage Allowance
The Personal Savings Allowance offers tax-free interest on savings depending on income. Basic rate taxpayers (20 per cent) get a £1,000 allowance, higher rate payers (40 per cent) get £500, and additional rate payers (45 per cent) get no allowance. Utilising this would save basic-rate and higher-rate taxpayers £200.
The Marriage Allowance allows you to transfer up to 10 per cent (£1,260) of your Personal Allowance to your partner, reducing their tax bill by up to £252 per year. For example, Person A earning £10,000 a year can transfer £1,260 of unused allowance to Person B earning £30,000, saving Person B £252 a year.
