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How to pay less income tax in England?

By Shabir - Euro Accounting Ltd

Income tax applies to all the income you receive, whether it is your salary, the profits you make as a self-employed person, income from real estate or any other kind of income. Here are a few tips to pay less tax: 

Personal Allowance

All taxpayers have a 'personal allowance'. This means that there is a maximum amount you can earn every year without paying tax. It depends on your age and your income. In 2016/17, it is around £11,000. 

However, you cannot have a personal allowance if you are not liable to pay tax in England and thus have to pay tax on 'remittance' basis. 

ISAs (Individual Savings Accounts) / Deposit account

You do not pay tax if some of your income comes from Individual Savings Accounts (ISA), 'savings certificates', children allocation... In 2016-17, there is a maximum amount of £15,240 that you can put in a ISA deposit account and up to £10,240 can be saved in cash. 

You do not pay tax on the interest and dividends you get from your ISA account, and the benefits you get from investments are exempt from capital gains tax. 

By paying "pensions contributions" (retirement contributions)

You can reduce tax on private retirement contributions by up to 100% of your annual earnings. You can get tax relief automatically if: 

  • your employer deducts retirement contributions from your salary before the deduction of income tax;
  • your insurance company arranges tax relief for you of 20% and adds it to your pension. 

You can get tax relief at source for all your personal pensions. 

Tax relief for the professional usage of your personal vehicle

You can get tax relief for your professional mileage if you use your own vehicle (car, motorbike, van, bike) for professional means. Here is the scale for the first 10,000 miles over one tax year: 

  • 45p for cars and vans
  • 24p for motorbikes
  • 20p for bikes
  • For the refund of additional passengers (journey by car or van), the rate is 5p by passenger, by journey and by mile. You can only get a refund for journeys having taken place for profesional reasons. 

Euro Accounting Ltd

+44(0)778 896 2405 - 0845 680 5168


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