Good morning
What are tax reliefs?
Tax reliefs are amounts of money for certain things the government likes that you can deduct from your gross pay, the best thing is that you do not have to pay tax on them. They are essentially a boost to your allowance
ISA and the personal savings allowances
You pay income tax on income that you earn on your savings, for example through interest paid on a cash account, or from dividends paid on investments.
ISA are Savings accounts into which you can save a specific amount per year ( 20,000 per tax year). ANY interest gained on the ISA’s, or any investment returns earned from stocks and shares ISAs, is tax free.
First ISA that you should research more about is;
Lifetime ISA
A Lifetime ISA is used to buy your first home, or save for your retirement.
The government will add a 25% bonus to your savings, up to a maximum of £1000 per tax year and you can only put a max of £4000 which is tax free. However, if you decide to withdraw your money other than the fact that you want to buy your home or retire you will be charged 25% government charge, this means that you could have less than what you put therefore DO NOT WITHDRAW unless for the reasons stated
example:
If I was to maximise my limit and invest my money for 10 years, I would have invested 40,000 of my own money but due to the government bonus I will gain 10k therefore totalling to £50.000.
I repeat, all of the interest you gained and any profit you make is completely TAX FREE!!
How can you open a Lifetime ISA
I personally use https://www.hl.co.uk/investment-services/lifetime-isa, great company and great customer service.
They charge 0.45% of the amount you put in. no more than £18 a year.
Cycle to work scheme
Your employer pays for your bike and you pay your employer back from your salary also known as “salary sacrifices”i.e money that comes out of your gross pay automatically. This means that you will not pay tax on it, unlike if you were to buy it from your net pay. You can also spend up to £1000 on a the bike and equipment.
How much could you save?
Lets assume that you bought a £1000 bike and some accessories which equals to £1240
You will save £248 in income tax !
The ownership fee is the fee you will have to pay if you would like to pay for the bike and keep it.
This is for ONE YEAR
The exact same package but the only difference is that this will be for 4 years.
YOU WILL SAVE £325 !!!
How can you apply?
https://www.cycle2work.info
Go through this link and apply as an employee. You will need your tax code.
Hope you enjoyed todays DailyFinance newsletter and I also hope you learnt something new :)
message me at “arzevent’ on snapchat to discuss if you would like