From marriage to pensions – Britons could be eligible for tax relief

Northern Justice: Veteran discusses transferring his MoD pension

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

While living costs surge, Britons are being urged to look into whether they could be entitled to any additional support, and an area they could potentially make a saving is through their tax. Certain expenditures qualify for tax relief, so it’s important for Britons to run checks to be sure they’re claiming correctly whenever possible.

From marriage allowances to working from home, people may be eligible for more or less tax relief than others.

However, one lesser-known type of relief could help boost a person’s pension value, according to a pensions expert.

Romi Savova, CEO at PensionBee, said: “One of the lesser known forms of tax relief is pension tax relief. Most UK taxpayers qualify for tax relief on their personal pension contributions, which essentially means the Government adds money to their pension pots as a reward for saving for the future.

“By utilising this form of tax relief, savers can help boost the value of their pension, without having to increase their contributions.”

 

Basic rate taxpayers get a 25 percent tax top-up, meaning that HMRC adds £25 for every £100 a saver pays into their pension.

Mr Savova said: “For personal pensions and certain workplace pensions, basic rate tax relief is usually claimed back automatically by the pension provider.

“Higher and additional rate taxpayers can claim a further 25 percent and 31 percent respectively through their Self-Assessment tax return or by contacting HMRC directly.”

The pensions expert continued: “When thinking about how much money to save into a pension, it’s important for savers to understand how pension tax relief works.

“For 2022/2023, savers can get tax relief on pension contributions up to £40,000 or 100 percent of their salary (whichever is lower). Any pension contributions made over this limit are taxed at a higher rate of tax.”

DON’T MISS: 
National Insurance levy scrapped – what it means for you [EXPLAINED]
‘It is important for savers not to panic when markets fall’ [INSIGHT]
Pension holders not to ‘be concerned’ as BoE stop bond-buying – expert [ANALYSIS]

What other forms of tax relief can be claimed?

There are several other types of tax relief workers can claim back.

Joanne Thorne, technical compliance manager at SJD Accountancy said: “PAYE employees may be able to claim tax back on flat-rate expenses, such as costs incurred for things like washing uniforms or purchasing tools or equipment, as long as they are for work purposes.”

If a person is required to work from home, costs such as business calls or utilities used while working may be eligible for tax relief – but not if they’ve chosen to work from home.

Ms Thorne said: “If the employer reimburses an employee for any expenses incurred, however, then no further tax relief can be claimed by the employee for them.”

However, for those who are self-employed, there are increased opportunities to claim back tax relief.

Ms Thorne said: “Self-employed workers do not automatically pay into pensions, but contributions to a private pension are free from tax and NI deductions.”

In addition, she continued: “Travel costs to see clients, such as fuel, mileage, hotel accommodation, or business rent and rates, should all be allowable costs, and so also can obtain tax relief.

“In fact, most expenditure that is incurred and necessary for the purpose of business is likely claimable.”

According to Ms Thorne, while both PAYE and self-employed Britons can claim travel expenses for costs incurred while travelling on the job, they can’t claim for their day-to-day, ordinary home-to-registered office commute.

Another form of tax relief can be claimed through the marriage allowance. The scheme allows for tax relief to be shared between couples who are married or are in a civil partnership.

To be eligible, one partner must earn below the personal allowance threshold of £12,570.

The Marriage Allowance tax relief lets one partner transfer £1,260 of their Personal Allowance to the higher-earning wife, husband, or civil partner.

This reduces their tax by up to £252 in the tax year (April 6 to April 5 of the next year).

But, that’s not all. There’s also additional tax relief to earn from things such as savings accounts.

David Baggaley, tax partner at Clive Owen LLP said: “Moving money from a regular savings account to an ISA, in effect, constitutes tax relief, as any interest income received is now tax-exempt rather than taxable.”

A more complete list of expenditures that qualify for tax relief, can be found on the Government’s website.

What is tax relief?

For those working in the UK, tax relief is used as a means to reduce the amount of tax paid to the Government from a person’s income.

The core taxes that individuals typically face are income tax, capital gains tax, inheritance tax and stamp duty land tax.

Mr Baggaley said: “Within each of these, there are various reliefs an individual can claim. To take income tax as an example, an individual could consider tax relief on pension contributions, charitable donations, and job-related and business expenses.”

Tax relief can then be given in form of a refund, or by increasing the person’s personal tax code, meaning they can earn more money before paying tax.

How this works for people will depend on the nature of their work, with different options available to PAYE employees and self-employed workers.

How do people claim?

Ms Thorne said: “For PAYE employees, some tax relief is calculated automatically by your employer, such as when you have your pension set up with them, and so you automatically pay less tax on your salary each time.

However, she continued: “For those working for themselves, or are directors of a limited company, it’s calculated when certain returns are filed, such as your company or personal tax returns, to reduce the tax paid.

“If you don’t complete tax returns, then you have to contact HMRC directly to apply.

“For PAYE employees, their employer will be able to claim most of their tax relief on their behalf, but for self-employed workers, it’s advisable that they engage with a qualified accountant to ensure they are operating as tax efficiently as possible and remaining compliant.”

Source: Read Full Article