With the soaring cost of living squeezing pockets, no one wants to be paying more tax than they should be.
Despite this, over £20 billion of tax allowances and reliefs remain unclaimed in the UK. The key to taking advantage of this is to recognise where savings could be made and create a plan to claim or make use of these as soon as possible.
So, what tax reliefs and benefits are available for you?
Income Tax Relief
Personal pension contributions
You may able to able to claim an Income Tax Relief on any private pension contributions if these come out of your pay before Income Tax is deducted.
This should be provided automatically if the income tax rate is 20 per cent (or 19 per cent in Scotland).
Remember, you can contribute up to £40,000 a year, provided your contributions are no higher than your earnings.
There is also a lower allowance for very high earners or those who have already begun taking money from a pension.
Gift aid payments
If you are a taxpayer making gift aid contributions and earn above the basic rate threshold of £50,270, you are eligible to claim higher tax relief on these contributions. You can do this via your self assessment tax return or via your PAYE code.
Tax relief via your PAYE code or tax return
If you incur business expenses in your job and do not get reimbursed for these or are reimbursed at a lower rate then you can claim tax relief on, you may be able to include a claim for these within your PAYE code or via your self assessment tax return.
For example, if you use your own car for business and do not get reimbursed at HMRC’s approved rates, then you can claim this tax relief.
There are numerous tax relief claims which can be made, such as working from home etc. It is worth reviewing what you may be entitled to claim for.
If you are married or in a civil partnership, you could be missing out on a tax relief of up to £252.
The Marriage Allowance allows you to transfer up to £1,260 of your Personal Allowance to your partner, effectively reducing your taxable income.
Eligible couples must have one partner who earns below the Personal Allowance threshold (£12,570) and the other partner pays Income Tax at the basic rate. You can back date your claim for up to 4 tax years.
Dividend Tax Allowance
Balancing your pay carefully between a salary and dividends from the profits of your business can be a great way of reducing the amount of tax you pay.
Every individual has a £2,000 annual dividend allowance. If you receive dividends in excess of this amount you will have to pay tax, albeit at a slightly reduced rate to regular income tax, in most cases.
If you have a child under the age of 11 that attends paid childcare, you may be eligible for up to £500 every three months to help with the costs. If your child is disabled, the allowance is up to £1,000 every three months.
This can help with the costs of any approved childcare, including childminders and after-school clubs.
According to HMRC, this is available for 1.7 million children, however only 300,000 parents made claims through the scheme.
Check if you are eligible here.
If you are entitled to any of these tax reliefs, it is important to claim these as soon as possible.
Need personal accounting advice? Contact us.