Turn your £1 investment into a £1 million tax-free prize!
- TBA
- Apr 10, 2024
- 5 min read
Updated: Feb 25
You’d be hard pressed to find someone who hasn’t complained about how expensive it is to live in the UK, especially with the ongoing cost of living crisis. In times like these, it’s essential not only to know how to save money, but also to know how to make full use of government assistance to ‘earn’ more money.
In this article, we’ll introduce several different schemes which could help you out.
1. Premium Bonds
Premium Bonds are an investment product issued by the state-owned savings bank National Savings and Investments (NS&I), which offers products encouraging people to save.
NS&I holds a monthly lottery for bondholders, allowing people to have to change to win prizes whilst also saving money. Savers also do not need to pay tax on any winnings. If you want to participate, you need to invest at least £25, and the maximum investment in bonds is £50,000.
For every £1 you invest, you receive a bond number. This means if you deposit £100, you’ll receive 100 bonds, and after holding the bonds for a month, you can participate in the monthly prize draw. Remember, each bond has a chance of winning a prize, so the more bonds you purchase, the higher your chances of winning. You can purchase bonds for yourself, or on behalf of your children, grandchildren, or great-grandchildren.
Premium Bonds were first introduced in 1956, and around 21 million people in the UK currently own them. However, it seems that many people don’t realise that they are eligible to claim prizes. Currently, there is a total of £81 million in unclaimed prizes. These unclaimed prizes include six prizes of £100,000, one of which is registered to a bondholder in Australia.
Additionally, many people have not claimed £25 small prizes, some of which date back to 1957.
There is no time limit for claiming these prizes, and each prize will be held until a legitimate owner is found. However, some winners may have already passed away, in which case it becomes part of their estate. Currently, unclaimed prizes are managed by NS&I, as many winners have not provided their addresses or any other contact details, making it impossible for the company to find them.
Do you remember if you purchased any bonds? If so, you can check if you missed out using the NS&I online prize checker, as long as you know your bond numbers.
2. The Marriage Allowance
HMRC regularly issues reminders for couples to take advantage of the Marriage Allowance. The Marriage Allowance is a tax relief measure which applies to couples, where one partner’s income is below the personal allowance threshold (£13,570 in the 2023/24 tax year).
The scheme allows one partner with the lower income to transfer up to 10% (currently £1260) of their personal allowance to the other. This means that in a single tax year, the allowance can reduce tax by up to £252.
It’s important to note that the tax relief is only applicable to the lower income partner if their income is below the personal allowance threshold. An application must be made by the lower income partner online, by the self-assessment system (if a tax return is submitted), or by filling out the MATCF form and sending it back to HMRC.
Eligible individuals can also backdate their application to previous tax years up to the 5th April 2019. Their partner’s tax liabilities will then subsequently be re-adjusted accordingly.
3. Child Trust Funds
Child Trust Funds were introduced first introduced in 2005 but were abolished in 2011. Over 6.3 million parents in the UK opened Child Trust Funds for their children, locking away billions of pounds.
These funds are accessible by their children once they turn 18. In 2020, the funds began to mature, and this will continue until January 2029.
However, many of these accounts have been forgotten. This means many young people are unaware they have money waiting for them. Additionally, some parents may have forgotten about their child’s fund, perhaps after moving. Last year, it was reported that there could be over 900,000 unclaimed Child Trust Funds, totalling over £1.7 billion.
The good news is that the charity Share Foundation has been working with the government to help young people find their accounts. They provide a free tracing service which can be accessed at findctf.sharefound.org, where you can then fill out a simple form with the relevant information. Additionally, HMRC has also released an online tool to help young people locate their accounts.
4. Attendance Allowance
If you have reached State Pension age and also have a physical or mental disability, or need care due to these conditions, you can apply for the Attendance Allowance.
The Attendance Allowance is paid weekly at two different rates, depending on how much help you need, up to a maximum of £5,306 per year. Depending on the level of care required, you can receive the lower rate of £68.10 or the higher rate of £101.75, both of which are tax-free.
The Attendance Allowance is not means-tested, and other factors such as household members are not taken into account. Even if you live in a care home and pay for care yourself, you can still be eligible.
However, it seems many people are unaware of this benefit. In December, a report from Policy in Practice and MoneySavingExpert.com stated that every year, 1.1 million families who are eligible for pension age miss out on £5.2 billion of care allowances.
To apply, you can call the dedicated helpline (0800 731 0122) to request a form and return the form by post.
5. Child Benefit
Child Benefit is a payment parents can claim for their children, usually paid every four weeks, sometimes weekly. If you are eligible, the first child can receive £24 per week, and subsequent children can receive £15.90 per week. As of the 6th April 2024, if you or your partner’s individual income is below £60,000 per year, any Child Benefit received is tax-free. The previous threshold was £50,000.
If you or your partner’s income exceeds the threshold, applying for Child Benefit will increase your tax liability. However, it may still be a good idea to do so, especially if you or your partner are not working, or have an income below the lower earnings limit for National Insurance contributions.
You can apply by filling out an online form or contacting the Child Benefit Office. You can apply online, by phone (0300 200 3100), or by post. New parents can now also apply for Child Benefit online for the first time without having to wait up to 16 weeks for the first payment. The new application process on the Gov.uk website takes about 10 minutes and can result in payment within three days.
6. Council Tax Discount
Many people also overlook council tax discounts. There are many reasons why a discount may apply to your situation. For example, if you are living alone, you can receive a 25% discount. Other situations include if you have a partner who has been living at a care home for a long time, you are on a low income, or are in receipt of certain benefits.
You’ll need to contact your local council to discuss your eligibility and to apply for the appropriate discount.
7. Pension Credit
If you’ve reached State Pension age and are on a low income, Pension Credit provides extra money to help with living expenses and some housing costs.
If you are single, it can raise your weekly income to £201.05. If you have a partner, it can raise your combined weekly income to £306.85. You can apply online, by phone (0800 99 1234), or by post.
