18 Ways to Avoid Paying Tax (Legally)

Finance-focused summary (UK tax planning)

Core tax-saving recommendations (non-investment + investment + pensions)

1) Maximize workplace pensions (including “relief at source”)

• Recommendation: Contribute to a workplace pension (e.g., via salary sacrifice if available) and maximize any employer match.
• Relief at source reclaim (higher/additional rate taxpayers):
  • If your pension scheme uses relief at source, you automatically receive 20% relief at the point of contribution.
  • Higher/additional rate taxpayers should reclaim the missing 20–25% difference via self-assessment or HMRC.
  • Backdate window: you can reclaim up to 4 tax years (current + previous 3).
• Example given:
  • Contributing £5,000/year as a higher rate taxpayer could lead to £5,000 cash reclaimed across 4 years, then £1,250/year thereafter while contributing.
• Claim-rate disclosure: 72% of eligible higher-rate taxpayers don’t claim it, around £1.4bn/year unclaimed.
• Provider example: NEST (UK workplace pension provider), referenced as having 3.9 million people paying in through work.

2) Pension contributions for a non-earning spouse/partner

• Rule: Even with no earnings, basic-rate tax relief is available on contributions up to £3,600/year gross.
• Example: Pay £2,880/year net → provider claims £720 from HMRC.
• Strategic benefit: Creates a separate pension pot under the lower earner’s name, enabling more flexibility in retirement withdrawals and potentially improving tax efficiency.

3) Use pensions to reduce “adjusted net income” (and protect benefits)

• Mechanism: Pension contributions can reduce adjusted net income, helping avoid “cliff edges.”
• Thresholds highlighted:
  • Over £50,270: income can move into the higher-rate band.
  • Over £60,000: child benefit can be clawed back.
  • Over £100,000: personal allowance starts to disappear.
  • Over £100,000 (expected adjusted net income): loss of access to tax-free childcare and funded childcare support.
• Explicit warning: “Go £1 over that 100k” could cost tens of thousands of pounds.
• Note: Relief-at-source contributions are included in the calculation (as described).

4) Limited company directors: pay into a personal SIPP via the company

• Recommendation: If you run a limited company, you can open a SIPP and make company-to-pension contributions.
• Tax effects claimed (as described):
  • Moves money to the individual without income/dividend taxes.
  • Often treated as a business expense, potentially reducing corporation tax.
• Caution: Not all pension providers allow company transfers—check provider rules.

5) Pension “carry forward” (use unused annual allowance)

• Framework/rule: Use unused annual allowance from the previous 3 tax years in addition to the current year’s allowance.
• Current annual allowance cited: £60,000.
• Potential outcome (given): If you didn’t contribute over that period, you could contribute up to £240,000 in one year (once relief is considered).
• Income rule nuance mentioned:
  • For typical employees, total pension contributions in a year generally can’t exceed total income.
  • For employer contributions (e.g., directors via a limited company), the rules differ—claimed as allowing more than personal income, limited primarily by the allowance.

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Working-from-home & commuting deductions (income tax relief)

6) Working from home expenses (and claiming back)

• Rule mentioned: From the current tax year, rules changed, but you may still claim for previous years up to 4 years.
• Gas/electric options (HMRC):
  • Either £6/week flat rate, or
  • the actual extra amount if evidenced.
• Important condition: You must be required to work from home (not just occasional/home preference).

7) Mileage reimbursement “top-up” if employer pays less than HMRC

• HMRC-approved car rate: increased from 45p to 55p per mile (on first 10,000 business miles, as stated).
• Other rate mentioned: 20p per mile for cycling.
• Example (car):
  • 8,000 business miles
  • Employer pays 45p, HMRC is 55p → difference 10p
  • Difference total: £800
  • Relief value depends on tax rate:
    • Basic rate: £160
    • Higher rate: £320
    • Additional rate: £360

8) Check your tax code (potential overcharge)

• Disclosure: HMRC overcharged 5.6 million people totaling £3.5bn (average £625 each).
• Recommendation: check your tax code; if unsure, speak to HR.

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Investing/tax wrappers & capital gains strategies

9) Use a Stocks & Shares ISA before a GIA

• Recommendation: Use a stocks and shares ISA before a general investment account (GIA).
• Reason: ISAs avoid/defers dividend and capital gains tax.
• Positioning: ISA can supplement retirement income after pension withdrawals reach the point where tax may start.

10) Offset capital losses against capital gains (and carry forward)

• Method:
  • Use allowable losses against gains in the current year, or
  • carry them forward.
• Reporting: losses must be reported on a tax return.
• Timeline noted: can claim capital losses up to 4 years after the end of the tax year of disposal.

11) Use the personal savings allowance (cash interest)

• Not a “method to reduce tax,” but an allowance:
  • Tax-free cash interest up to:
    • £1,000 (basic rate)
    • £500 (higher rate)
    • £0 (additional rate)

12) Transfer assets between spouses before selling (to use both CGT allowances)

• Rule: Transfers between spouses/civil partners living together are usually no gain/no loss for CGT.
• CGT allowance mentioned: £3,000/year per person.
• UK CGT rates cited:
  • 18% basic-rate taxpayers
  • 24% higher/additional rate taxpayers
• Caution: Transfers must be genuine and properly documented (avoid “sketchy transfers”).

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Charity and inheritance tax (IHT) strategies

13) Use Gift Aid correctly

• Mechanism: Charity claims back basic-rate tax; donor can claim the higher-rate difference.
• Key number: 25p extra per £1 donated.
• Recommendation: keep records—Gift Aid may provide extra relief for higher-rate payers.

14) Leave at least 10% of net estate to charity (IHT rate relief)

• Rule: If ≥10% of the net estate goes to qualifying charities, the IHT rate can drop from 40% to 36%.
• Caution/impact: family outcomes may be only slightly worse than charity benefit.

15) Inheritance tax basics + allowances

• Allowance mentioned: £325,000 basic IHT allowance.
• Additional allowance: £175,000 residential allowance when main home passes to children/grandchildren.
• Potential combined tax-free amount (couples): could reach ~£1 million (as stated).
• Context disclosed: IHT allowances are frozen; changes are coming, including pensions into the estate, increasing the chance more estates get pulled in over time.

16) IHT reduction: annual gifting

• Annual gifting allowance: £3,000 per year tax-free (falls outside the estate immediately).
• Carry forward: unused annual exemption can be carried forward, allowing £6,000/year after that (as described).

17) “Normal expenditure out of income” exemption (for retirees)

• Framework/3 tests:
  1. Must come from income, not capital
  2. Must be regular (habitual pattern)
  3. Must not affect normal standard of living
• Caution: not everything counts as “income” (examples: some insurance withdrawals, annuity payments, care plan payments may be treated as capital).

18) “Potentially exempt transfers” (PETs): give now, survive 7 years

• Rule/method: Gifts made now are usually free of IHT if you survive 7 years.
• If death occurs within 7 years: IHT handled on a sliding scale (taper mentioned generally, without numeric detail).
• Important note: If gifting is below previously discussed allowances, the amount may be taken in full off allowances before IHT is calculated; taper relief may not apply as suggested.

19) Marriage Allowance

• Rule: If one partner earns below the £12,570/year threshold and the other is a basic-rate taxpayer, an allowance can transfer about £1,260.
• Tax saving mentioned: up to £252/year.
• Timeline: claim can be backdated up to 4 tax years.

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Finance instruments / tickers / assets mentioned

• Instruments/regimes:
  • Pensions (workplace pensions), SIPP, ISAs (stocks & shares ISA, cash ISA)
  • GIA (general investment account)
  • Capital gains tax (CGT) losses/gains
  • Gift Aid (charitable donations)
  • Inheritance tax (IHT) provisions (tax regime, not an investable asset)
• Platform/broker example: Trading 212
• Tickers/assets: no specific stock/ETF/crypto tickers were named.
  • Bitcoin was referenced generally as a caution/illustrative CGT example (“don’t send Bitcoin…”).

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Step-by-step frameworks / methodologies explicitly shared

• Pension “relief at source” reclaim (higher rate):
  1. Confirm your scheme uses relief at source
  2. Reclaim the missing 20–25% via self-assessment or HMRC
  3. Reclaim within current + prior 3 tax years (up to 4 years total)
• Adjusted net income protection via pensions:
  • Use pension contributions to reduce adjusted net income
  • Target staying below:
    • £60,000 (child benefit clawback)
    • £100,000 (personal allowance loss; childcare loss)
• Working-from-home claim approach:
  1. Check you’re required to work from home
  2. Use HMRC method: £6/week or actual extra costs with evidence
  3. Claim for up to 4 previous tax years
• Capital gains tax loss harvesting:
  • Sell/realize a loss, then report the loss
  • Offset against gains or carry forward
  • Loss claim timeline referenced: up to 4 years after the end of the disposal tax year
• IHT “normal expenditure out of income” tests (3 tests):
  • From income, regular pattern, doesn’t reduce standard of living
• IHT PETs framework:
  • Gift now
  • Survive 7 years to usually exempt; otherwise apply sliding scale/taper logic
• Marriage Allowance claim:
  • Partner below £12,570
  • Other partner is a basic-rate taxpayer
  • Transfer about £1,260 allowance; claim can be backdated 4 years

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Key numbers & thresholds highlighted

• Tax & pensions:
  • Higher-rate reclaim: automatic 20%; missing 20–25%
  • Backdate: 4 tax years
  • Example contribution: £5,000/year
  • Non-earning spouse relief cap: £3,600 gross (pay £2,880 net → £720 claimed)
  • Pension annual allowance: £60,000
  • Carry forward described: up to £240,000
• Working from home:
  • £6/week option
  • Claim window: up to 4 years
• Mileage:
  • Car: 45p → 55p/mile (first 10,000 business miles)
  • Bicycle: 20p/mile
  • Example: 8,000 miles; £800 difference; relief values £160/£320/£360
• Tax code / HMRC disclosure:
  • 5.6m people overcharged; £3.5bn total; average £625
• ISA/cash interest:
  • Personal savings allowance: £1,000 (basic), £500 (higher), £0 (additional)
• CGT / spouse transfers:
  • CGT allowance: £3,000/year per person
  • CGT rates: 18% (basic), 24% (higher/additional)
• Charity/IHT:
  • Gift Aid uplift: 25p per £1
  • Charity leaving ≥10%: IHT rate 40% → 36%
  • IHT allowance: £325,000
  • Residential allowance: £175,000
  • Potential couple total: “~£1 million tax-free” (as stated)
  • Annual gifting: £3,000/year; carry forward to £6,000/year
• Marriage Allowance:
  • Transfer ~£1,260
  • Saving up to £252/year
  • Backdating up to 4 tax years

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Disclosures / cautions mentioned

• Advice framed as “legal ways” to reduce tax.
• Recommendation to seek help if unsure: “If you’re unsure… speak to a professional or contact HMRC directly.”
• States intent is educational (“Not shady / not hate tax”).
• No clear “not financial advice” disclaimer text was included in the provided segment (based on the subtitles shown).

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Presenters / sources mentioned

• Presenter: YouTube narrator (name not provided in subtitles).
• Named organizations/examples: HMRC, NEST, Trading 212.