TAXPAYERS are going to have a nasty surprise next year as Boris Johnson announced that national insurance rates would rise.
Britons will be charged 1.25% more than they were this year to help fund a social protection cap.
This means that someone earning the average UK salary will have to pay an additional £ 255 each year.
If finances are tight, this could be a serious dent in the budget. But there are thousands of tax relief options that could make a big difference.
In fact, there are some options that can save you thousands of pounds, and far too many people never make a claim.
Here are all the main types of relief, who qualifies and how to apply:
Claiming tax relief for working from home – up to £ 500
More of us than ever are working from home, thanks to the coronavirus pandemic.
The good news is that if your employer tells you to stay home for even a day, you can claim the full allowance.
It’s worth up to £ 125 a year and you can backdate claims up to four years.
This means that the maximum amount you can claim is £ 500. Claims from previous years are paid as a lump sum in your salary, while outstanding claims for that year will count towards your monthly salary.
Better yet, the government has created a handy online tool to help you reclaim work at home tax.
You can read more about working from home tax breaks in our step-by-step guide.
Take advantage of the marriage allowance – worth up to £ 1,220
Marriage allowance allows couples who have married to transfer part of their allowance that is tax-free to a spouse.
Typically, no one has to pay income tax on the first £ 12,500 of their income.
But if you are married or in a civil partnership and one partner earns less than £ 12,570 and the other less than £ 50,270, you can transfer part of this allowance.
Essentially, the person who earns the most receives a portion of their partner’s unused allowance, which means a lower tax bill.
This year the tax refund is £ 252, but you can also back date your claim four years from the tax year starting in April 2017, as long as you were married at that time.
This allowance has increased slightly in recent years, so a five-year claim would be worth £ 1,220.
The fastest way to apply is online through the gov.uk website.
Recover overpaid pension tax – averaging £ 3,379
Almost 10,000 retirees accessing their pension funds overpaid in the first three months of the new tax year from April to June.
They all claimed £ 3,379 each on average from HMRC, but your payout could be significantly higher or lower depending on the retirement income you received.
Typically, you can receive the first 25% of your pension tax-free, and anything over is taxed at the same rates as earned income.
But if you choose to take a lump sum, you can be taxed at an emergency rate, so you pay more than you should.
You can claim your cash back from HMRC through an online form or by using a mailed paper form.
The exact form you need will depend on how you accessed your money, but we’ve got you covered here in our guide.
Claim flat tax relief – up to £ 2,299.50
If you have to wear a uniform for work and you have to buy it yourself, wash it, replace it or repair it, you can claim tax relief.
The amount you will get varies enormously and depends on your industry and your tax rate.
You can either claim relief on the exact amount you spent by providing receipts or request a lump sum expense.
You must have used your own money to pay, and your employer cannot have refunded all of the money to you.
So if you are a base rate taxpayer you get 20% refund, high rate taxpayers get 40% and additional taxpayers get 45%.
For most industries the flat rate of expenditure is £ 60 per annum, meaning that a base rate taxpayer would get £ 12 relief while an additional taxpayer would get £ 27.
But some industries have rates that are significantly higher. For example, the biggest lump sum expense is for pilots and cabin crew in uniform.
If this is your industry, the allowance is £ 1,022 per annum, which works out to £ 204.40 for base rate payers, £ 408.80 for higher rate payers, and £ 459. £ 90 for additional rate payers.
You can backdate claims for the past five years, so that a pilot or crew member could earn up to £ 2,299.50 with a five-year claim.
If you are in the military, your uniform costs should already be accounted for in your tax code so that you cannot make another claim.
You may be able to apply online, but if you usually do a self-assessment, you will need to do it through your tax return.
Once you’ve claimed once, your tax code needs to be adjusted for years to come so that it happens automatically.
You may also be able to claim other work-related expenses such as tools, vehicles, professional fees, travel and overnight expenses.
We describe the main types of relief and how to claim in our guide.
Get a council tax refund – worth up to £ 2,225.76
Housing tax varies from country to country, which means the amount you pay depends on where you live.
Who’s looking for? suggest people living in Nottingham have the highest bills, with a D-Band property costing £ 2,225.76.
Those who live in Westminster have the cheapest bills, as a D-Band property will only cost you £ 829.87 in municipal tax bills.
Whatever you pay, you will benefit from a 25% reduction on your bill if you count as an adult for the purposes of the residence tax and either:
- You live alone
- No one else in your house counts as an adult
You’ll usually get a 50% discount if no one living in your home, including you, counts as an adult.
You can also benefit from a 50% reduction if you live with “ignored people”, that is, a person who does not have to pay council tax.
A live-in caregiver and a severely mentally handicapped person fall into this category.
Full-time students can benefit from a 100% reduction on the housing tax,
If you have certain benefits, you may be eligible for a 100% reduction on your municipal tax bill, although you will need to check with your city council to see what help they can offer.
You can request discounts on the gov.uk website or by contacting your local council.
You might also be able to claim money if your home is not in the correct category.
You have to be careful because the bills can go up or down, but if you are successful the payment could be in the thousands.
For example, a Martin Lewis fan got £ 7,625 in municipal tax rebate – find out how to do it here.
Pensions tax relief – worth up to £ 10,000
When you contribute to a pension, the government gives you tax relief on your contributions. In fact, contributing to a pension is the most tax-efficient form of savings, according to the Institute of Fiscal Studies.
But if you are a higher or additional rate taxpayer, you can only get 20% tax relief added at source and you have to claim the rest yourself.
You can request additional tax relief through a self-assessment declaration and you will get:
- 20% up to the amount of any income you paid 40% tax on
- 25% up to the amount of any income you paid 45% tax on
This means that you could get an additional 25% relief. The annual pension allowance is worth £ 40,000, so an additional 25% would add up to an additional £ 10,000.
Season Pass Loans and Other Salary Benefits – Save Thousands
If your business offers tax-free seasonal subscription loans, you can save hundreds of dollars on travel costs. You need to check if your employer offers the plan.
Another benefit that can save you a lot of money is tax-free child care programs.
You can get up to £ 500 every 3 months for each of your children to help with childcare costs. It goes up to £ 1,000 every three months if a child is disabled.
You must earn less than £ 100,000 per year to be eligible and you can apply for the allowance online.
Room rental relief – save up to £ 3,375
The Rent a Room program allows you to earn up to a tax-free threshold of £ 7,500 per year by renting furnished accommodation in your home.
If you are an additional rate taxpayer, that means you get back £ 3,375 of what you would otherwise have paid in taxes.
If you usually self-contribute, you can make a claim on your tax return, if not, you need to contact HMRC.
Tax relief for charitable donations
Donations to charities from individuals are tax exempt. You can get tax relief if you donate:
- via Gift Aid
- directly from your salary or pension, via Payroll Giving
If you pay income tax above the base rate of 20%, you can claim the difference between the tax you paid on the donation and what the charity got back when you complete your return. tax.
If you are not completing a self-assessment tax return, call HMRC to tell them about your charitable giving.
Checking your tax code – thousands of pounds
The tax authorities could owe you large sums of money if you enter the wrong code on your payslip.
If you’ve recently moved, you might find that you’ve been subjected to the emergency tax code, which means you could be paying a lot more than you need to.
You can check if your tax code is correct using HMRC’s online tool. If it is wrong, contact HMRC to let it know on 0300 200 3300.
If you owe money, HMRC will send you a letter, so make sure they have the correct address for you.
The amount you might get back depends on the tax code you were assigned, your salary, and the amount of tax you should have been charged.
But you could be owed hundreds – or in some cases thousands – of pounds.
You can learn more about tax codes in our helpful guide.
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