As the UK emerges from the pandemic, with billions spent on furlough and the NHS put under unprecedented pressure, taxes are going up to restore the Treasury’s coffers and tackle the NHS backlog. From the 6^th of April, National Insurance contributions are to rise by 1.25 percentage points from 12% to 13.25%, which really means your contributions will likely rise by over 10%! This is in combination with the upcoming increases in dividend and council taxes, at a time where many are already feeling the squeeze as the cost-of-living bites. Naturally, for many cutting down on tax payments would make a significant difference to them and their families at the end of the month. Here’s how to do it:

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ISAs

Tried and tested, ISAs have always been one of the most popular vehicles to protect savers from excess tax. In the UK there are four types of ISAs available: stocks and shares ISAs, cash ISAs, innovative finance ISAs and lifetime ISAs. You currently get an ISA allowance of £20,000 every year.

What sets ISAs apart is that you pay no tax whatsoever on interest or capital gains, nor must you declare it on your tax return. Over the long term, this can make a huge difference to how much money you keep. Let’s do a quick calculation to see exactly how: if you were to invest your full ISA allowance of £20,000 each year in a stocks and shares ISA and made 8% a year over 20 years, reinvesting the profits, you would have made £703,295.27. At the current capital gains tax rate of 20%, you would save £140,659.054 of tax, just for investing in an ISA rather than a regular investment account! Check out our top-rated Stocks and Shares ISAs.

Pensions

The government want to incentivise people to pay into their pensions, so that they have enough to live on in later life. For this reason, there is great tax relief on pension contributions. You can get relief for the full value of income tax you pay, because it is paid into your pension before tax is calculated. So, for example if you made £60,000 per year and paid £15,000 into your pension, you get tax relief on that full £15,000.

Many employers match contributions as well, so you get a double-edged benefit of tax relief and an employer boost, so make sure you take advantage of your full entitlement!

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VCTs and EISs

VCT and EIS stand for Venture Capital Trust and Enterprise Investment Scheme respectively. These are government-backed schemes to encourage investment into small British companies by giving tax reliefs, whilst helping these companies raise funds.

So, how much can you save? Well, you get 30% tax relief by investing in these schemes; however, you must hold your EIS investment for at least three years, and VCT investment for at least five.

So with EIS investments you can get your money out more quickly, though the benefit of the VCT is that, unlike with the EIS, you aren’t liable for capital gains or dividend tax.

Whilst clearly very tempting, these investments are risky due to the nature of the investments, so are not suitable for everyone. Typically, it is very high earners who have the most to gain from these schemes. If you would like to know if you would benefit, make sure you speak with a qualified Financial Advisor.

The post Taxes are going up! Here are 3 ways to pay less appeared first on The Twelfth Magpie.

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Dividend stocks

One of my favourite ways of building passive income is through owning dividend stocks. Dividend stocks are simply shares in a company that pay a portion of their profits to their investors through dividends. I love this method because it is simple to set up and requires no ongoing maintenance until you decide to sell. Through these dividends, you get extra income on top of any capital gains, and if you’re really savvy, can reinvest your extra earnings to benefit from the magic of compound interest. You might even want to know more about our newsletter subscription service, Share Advisor, in which we make monthly recommendations of income stocks (as well as growth opportunities). Of course, remember investments always involve various risks, and you may get back less than you put in. There is a risk of losing the capital invested.

Cashback

Getting cashback on your everyday purchases is another fantastic passive income strategy I take advantage of. If you’re planning on buying something, why not get some extra cash for doing it? Websites like TopCashback and Quidco make it incredibly easy to get money back on things clothes, technology and household bills. In fact, Quidco members claim back a handy £300 per year on average!

Another popular way to claim cashback is through cashback credit cards. I love the American Express Platinum Cashback credit card, which offers 5% cashback on purchases on the first 3 months (capped at £125), and between 0.75% and 1.25% cashback thereafter, depending on how much you spend. For someone spending £500 per month, this means £108.75 yearly cashback.

Put the two together and that’s an extra £409 a year in your pocket, which is certainly worthwhile if you ask me!

Passive income apps

It may sound too good to be true, but some apps really pay you for doing very little. For example, if you don’t mind sharing your data Ipsos will pay you between £5 and £10 per month just to download their app. After that, just use your device as normal. It works by collecting data in the background which it sells to companies, and cuts you in. It’s all totally anonymous and no one knows it’s your data specifically.

Another app you’ll find on my phone is the Sweatcoin app, which will pay you just for walking: perfect if, like me, you prioritise your 10,000 steps per day. For every 1,000 steps, you will receive just under 1 sweatcoin, which can be exchanged for cool products at a time of your choosing. You can spend them quickly for small rewards or save up for more valuable items. Recent options include iPhones and PayPal vouchers; however, rewards are constantly changing so you’ll need to be quick once something catches your eye!

The post How I’m building passive income for financial freedom in 2022 and beyond appeared first on The Twelfth Magpie.

More reading

• FTSE 250 stock CMC’s shares have rocketed 51%! What’s going on?
• Will I buy SpaceX at £100 a share in my SIPP?
• Aberdeen shares are back in the FTSE 100 — is this turnaround stock just getting started?
• Down 65% with a 5.65% yield! Is this dividend share a once-in-a-decade buy? 
• This is the worst FTSE 100 share over 5 years. Should I sell it?

With inflation reaching its highest level in 30 years and wages struggling to keep up, many people are wondering how they can bag some extra cash. Well, good news – what if I said you could make hundreds of pounds from the comfort of your living room? And better still, all it takes from you is up to an hour of your time! That’s where the competitive world of high street banking comes in. High street banks are always competing for new customers, and many will offer you great incentives to switch to one of their accounts. I’ve rounded up my top four deals available right now:

Virgin Money – £100 experience day voucher, plus 5.02% interest on up to £1,000

Thrill seekers will love this reward from Virgin Money, who will give you a £100 experience day voucher for making the switch to their M Plus account. With over 2,000 experiences available, there’s certainly something for everyone. Ever fancied skydiving, a track day or scuba-diving? Well, now’s your chance! But the fun doesn’t stop there – they also offer a boosted interest rate of 5.02% on up to £1,000 for the first year, worth over £50 for those savvy savers. To qualify for this fantastic offer, pay in at least £1,000, use the mobile app and set up two direct debits – then sit back and let the rewards roll in!

About the account:

• Minimum pay-in: None
• 19.9%, 29.9% or 39.9% EAR variable on arranged overdrafts
• 19.9%, 29.9% or 39.9% EAR variable on arranged overdrafts, in addition to a £4 unpaid transaction fee

Chase Bank – 1% cashback for a year

Chase don’t offer a cash bonus for switching; what they do offer, however, is 1% cashback on all your purchases for an entire year, certainly worth considering for big spenders. That’s 1% back on all those Saturday morning lattes, lunches out with friends and trips to the cinema – it all counts! Another nifty trick is that the interest gets supercharged to 5% via the account’s roundup feature, where it will round up purchases to the nearest pound and the difference gets moved into another account paying a substantial 5% AER. Admittedly, it’s unlikely you will save much money in this roundup account, but hey, look after the pennies…. Sound interesting? To qualify, just switch to the Chase current account, activate the deal in the app and off you go. Do note that Chase currently can’t set up direct debits, although this feature is ‘coming soon’ so keep an eye out if it’s important to you.

About the account:

• Minimum pay-in: None
• Overdrafts not available
• Direct debits not available (for now)

First Direct – £150 switching bonus

Next is First Direct, who will pay you a cool £150 to switch to their current account. And that’s not the only reason you might want to join them, as they also ranked second in the latest customer survey for overall service quality, with a whopping 81% of polled customers claiming they would recommend the bank to friends and family – only Monzo scored higher. This makes it especially suited for those who value good old-fashioned customer service. To benefit from this deal, all you need to do is switch and pay in £1,000 or more, it’s that simple.

About the account:

• Minimum pay-in: None
• 0% EAR variable on the first £250
• 39.9% EAR variable over £250

Santander – £140 switching bonus, plus 1-3% cashback

Santander, the Spanish bank that has become a stalwart of the British high street, has a tasty deal for those willing to make the switch. Not only do they offer a very competitive £140 in cash, but they will also give you up to 3% cashback on household bills – a nifty bonus considering the recent rise in energy prices. To qualify, just switch your main current account to Santander, pay in £1,000+, have at least two direct debits and log into online banking at least every three months. It’s worth noting, however, there is a £2 monthly fee for using the account.

About the account:

• Minimum pay-in: £500 per month
• 0% EAR variable on unarranged overdrafts
• 39.94% EAR variable arranged overdrafts

The post How a simple switch could earn you £100s! (And you can do it in under an hour) appeared first on The Twelfth Magpie.

More reading

• FTSE 250 stock CMC’s shares have rocketed 51%! What’s going on?
• Will I buy SpaceX at £100 a share in my SIPP?
• Aberdeen shares are back in the FTSE 100 — is this turnaround stock just getting started?
• Down 65% with a 5.65% yield! Is this dividend share a once-in-a-decade buy? 
• This is the worst FTSE 100 share over 5 years. Should I sell it?