Tax Relief means that a person
- Claims reduction of tax for making payments / contributions to certain sectors like charity donations, pension contributions or investing in start up business and many more qualified activities which government wants to promote for the self-employed;
Some types of Tax Relief are automatic while for others people must apply.
Receiving Tax Relief
- Tax relief applies to charity donations, pension contributions, maintenance payments, and time spent working onboard a ship outside the United Kingdom. Tax relief can be claimed by employed individuals who use their own money for travel and/or to purchase things required in order to do their job of work.
Charitable Donations – Tax Relief
Individuals who donate to charity are exempt from tax on the donation. Tax relief is available on donations made:
- Through Gift Aid
- Straight from wages or pension, via Payroll Giving;
Donations through Gift Aid
Community Amateur Sports Clubs (CASCs) or charities can register with HMRC to be included in the Gift Aid scheme. After they have registered, they can claim back the tax already paid on donations. Individuals will get a form to sign from the CASC or charity to which they donated. Individuals must ask the CASC or charity for an HMRC charity reference number if they are not sure. If the CASC or charity reclaims more tax than the individual has paid, HMRC may ask for more tax to cover the difference.
Income Tax at 40% or 45%
An individual can claim back the difference between the tax paid on the donation and the amount the charity claimed back on their self-assessment tax return. Individuals can contact HMRC to inform them about the charity donation if they have not filed a self-assessment tax return. Donations made through Gift Aid may mean the tax-free allowances increase if:
- An individual gets a higher tax-free Personal Allowance because they were born before 6 April 1938;
- An individual is eligible for Married Couple’s Allowance.
When an individual files a self-assessment tax return allowances for charitable giving will normally be automatically attuned where applicable, but if this does not occur automatically, the individual can inform HMRC by phone instead.
Payroll Giving schemes
If an employer or pension provider offers a Payroll Giving scheme, donations through the scheme are made on behalf of the individual before income tax is deducted. An individual can still pay NI contributions on the amount donated, but cannot pay income tax on the amount donated.
Claiming a Tax Refund/Rebate Online
The P800 tax calculation letter informs individuals that they are eligible to claim a tax refund, or rebate online. Tax rebates are available if an individual is:
- Employed and too much tax has been deducted from their pay;
- Has discontinued working;
- Filed a tax return and paid excess tax;
- Paid excess tax on pension payments;
- Purchased a life annuity.
An individual may also be able to reclaim tax if:
- They have used their own money in relation to work, i.e. for the purchase of fuel or work clothing;
- They paid tax on savings income (interest) but earned below their Personal Allowance, such as in cases of low income;
- If an individual lives in one country and earns income in another country.
Maintenance Payments – Tax Relief
Maintenance Payment Relief reduces an individual’s income tax if making maintenance payments to a former civil partner or an ex-spouse. An individual can get the tax relief providing all of the following apply:
- either of the two individuals in the marriage or civil partnership were born before 6 April 1935;
- After the relationship ended an individual was ordered by the Court to pay maintenance;
- The payments are for the safeguarding of a former civil partner or an ex-spouse, provided the respective individuals are not in a new civil partnership or marriage; also paid for dependent children under the age of 21;
Maintenance Payment Relief is worth 10% of the maintenance an individual pays to a former civil partner or an ex-spouse, with an upper limit of £322 a year (or 10% of £3,220). To claim, individuals should contact HMRC on:
Outside the UK: (+44) 135 535 9022
Closed Sundays and Bank Holidays
Best time to call: Phone lines are less busy Monday?Friday before 10am
Uniforms, Work Clothing, and Tools
An individual may be able to claim Tax Relief on the cost of:
- Replacing or repairing small tools needed for their job of work, e.g. an electrician or another trade buys an electric drill or a hairdresser buys scissors;
- Replacing, cleaning, and repairing specialist clothing, such as a uniform or safety boots.
Individuals cannot claim relief on the initial cost of buying small tools or clothing for work. If they need to buy new equipment related to their job of work, they can claim Capital Allowances instead.
What can individuals claim?
Individuals can claim either for what they have spent, by showing receipts, or go for a flat-rate deduction, which is an amount set and agreed by HMRC as that typically spent annually by an employee in all sorts of different occupations. In a case where the individual’s occupation is unlisted, a nominal amount of £60 in tax relief may be available. An individual does not have to keep records of expenses if claiming under a flat-rate deduction.
Reliefs Subject to the Cap
The legislation gives a large number of Income Tax Reliefs, even though not all of them are subject to the cap. The cap applies to the following against general income:
- Deduction by former employees for liabilities;
- Loss of employment relief;
- Relief for a trading loss;
- Share-loss relief on non-Seed Enterprise Investment Scheme (SEIS) shares and non-Enterprise Investment Scheme (EIS) shares;
- Post-cessation trading loss relief;
- Losses on deeply discounted securities;
- Relief for a loss in the early years of a trade;
- Relief for property losses arising from Capital Allowances or Agricultural expenses;
- Post-cessation property-loss relief;
- Relief for qualifying loan interest.
How DNS Accountants Can Help
DNS Accountants is an exceptional brand with years of experience in the domains of accounting and taxation. The firm has helped thousands of individuals claim income tax refunds/rebates and income tax reliefs. The DNS team includes learned taxation professionals and ACA’s or Chartered Accountants (CAs). With primary focus on customer service, the firm believes in delivering unmatched client service. DNS Accountants offers:
- Best-in-class accounting and tax-planning services;
- Tax refund and income tax relief claims;
- Services at a nominal rate;
The team at DNS Accountants is wholly committed to making clients’ experience of accounting and taxation as uncomplicated as possible. Income Tax Relief is just one of many areas of expertise where DNS offers clients tips and services. Individuals looking to save additional money benefit from a learned team of taxation professionals to guide them.
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