Could you be missing out on tax savings?

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

You may be able to able to claim Income Tax Relief on any private pension contributions if these come out of your net pay i.e. after Income Tax is deducted.

This is provided automatically if you’re a basic rate taxpayer (20%), however if you’re a higher or additional rate taxpayer you will need to claim the additional relief either via your self-assessment tax return or by adjustments through your tax code.

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.

Marriage allowance

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. The claim can also be backdated up to 5 April 2018.

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 it a slightly reduced rate to regular income tax, in most cases.

Tax-Free Childcare

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.

Posted in Blog, Tax.