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 able to able to claim an Income Tax Relief on any private pension contributions if these come out of your pay before Income Tax is deducted.
This should be provided automatically if the income tax rate is 20 per cent (or 19 per cent in Scotland).
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.
Additionally, if you make maintenance payments to a former spouse or civil partner, you could be eligible for another income tax relief.
If you are entitled to this, the relief is worth 10 per cent of your payments, with a maximum of £364 per year.
This applies when you pay maintenance under a court order for your ex-partner or children under the age of 21 and either of you were born before 6 April 1935.
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.
