What Income Tax reliefs are available?
14th April 2021 News CHW Accounting
Filing a self-assessment tax return does not necessarily mean paying extra tax. Often it can mean tax reliefs and refunds.
Tax relief means that you either:
- pay less tax to take account of money you’ve spent on specific things, like business expenses if you’re self-employed
- get tax back or get it repaid in another way, like into a personal pension
Some of the income tax reliefs available are:
Private pension contributions
You can get tax relief on private pension contributions worth up to 100% of your annual earnings.
You get the tax relief automatically if your:
- employer takes workplace pension contributions out of your pay before deducting Income Tax
- rate of Income Tax is 20% – your pension provider will claim it as tax relief and add it to your pension pot (‘relief at source’)
However, you may have to claim tax relief on pension contributions if:
- you pay Income Tax at a rate above 20% and your pension provider claims the first 20% for you (relief at source)
- your pension scheme is not set up for automatic tax relief
- someone else pays into your pension
Donations to charity from individuals are tax free. You can get tax relief if you donate:
- through Gift Aid
- straight from your wages or pension, through Payroll Giving
If pay Income Tax above the 20% basic rate you can claim back the difference between the tax you’ve paid on the donation and what the charity got back when you fill in your Self-Assessment tax return.
Expenses if you’re self-employed
If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they’re allowable expenses.
Costs you can claim as allowable expense might include:
- office costs, for example stationery or phone bills
- travel costs, for example fuel, parking, train or bus fares
- clothing expenses, for example uniforms
- staff costs, for example salaries or subcontractor costs
- things you buy to sell on, for example stock or raw materials
- financial costs, for example insurance or bank charges
- costs of your business premises, for example heating, lighting, business rates
- advertising or marketing, for example website costs
- training courses related to your business, for example refresher courses
Tax relief for your job expenses if you are employed
If you are employed, you might be able to claim tax relief if:
- you use your own money for things that you must buy for your job
- you only use these things for your work
You cannot claim tax relief if your employer either gives you:
- all the money back
- an alternative, for example your employer gives you a laptop but you want a different type or model
You must have paid tax in the year and you’ll get tax relief based on what you’ve spent and the rate at which you pay tax.
Maintenance Payments Relief reduces your Income Tax if you make maintenance payments to an ex-spouse or civil partner.
To qualify, all of the following must apply:
- either of you were born before 6 April 1935
- you’re paying maintenance under a court order after the relationship has ended
- the payments are for the maintenance of your ex-spouse or former civil partner (provided they aren’t now remarried or in a new civil partnership) or for your children who are under 21
Maintenance Payments Relief is worth 10% of the maintenance you pay to your ex-spouse or civil partner, up to a maximum of £326 a year (or 10% of £3,260).
Some income tax reliefs are applied automatically but for others, a claim must be submitted to HMRC, usually through the self-assessment tax return.
Contact us for any advice regarding your self-assessment tax returns and claiming income tax relief.
This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.