TAXPAYERS are in for an unwelcome surprise next year as Boris Johnson has announced that National Insurance rates will be going up.
Brits will be charged 1.25% more than they were this year to help fund a social care cap.
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That means someone earning the average UK salary will have to pay £255 more each year.
If finances are tight, that could be a serious dent in the budget. But there are thousands of tax relief options that could more than make up the difference.
In fact, some options can save you thousands of pounds, and far too many people never get around to claiming.
Here’s all the main types of relief, who’s eligible and how to claim:
Claim tax relief for working from home – up to £500
More of us are working from home than ever before, thanks to the coronavirus pandemic.
The good news is, if you’re told to stay at home for even one day by your employer you can claim for the whole allowance.
It’s worth up to £125 each year and you can backdate claims for up to four years.
That means the maximum amount you can claim for comes to £500. Claims for previous years are paid as one lump sum in your salary while ongoing claims for this year will be factored into your monthly wage.
Even better, the government has created a handy online tool to help you get the working from home tax back.
You can find out more about working from home tax relief in our step-by-step guide.
Take advantage of the marriage allowance – worth up to £1,220
The Marriage allowance lets couples that have tied the knot transfer some of their tax-free allowance to a spouse.
Typically, nobody has to pay income tax on the first £12,500 of their earnings.
But if you’re married or in a civil partnership, and one partner earns less than £12,570 and the other earns less than £50,270 then you can transfer some of that allowance across.
Essentially, the higher earning person gets some of the unused allowance from their partner, which means a smaller tax bill.
This year, the tax refund is worth £252, but you can also backdate your claim for four years to the tax year starting in April 2017 as long as you were married then.
This allowance has risen slightly over the past few years, so a five-year claim would be worth £1,220.
The quickest way to apply is online through the gov.uk website.
Claim back overpaid pension tax – worth £3,379 on average
Nearly 10,000 retirees accessing their pension fund overpaid in the first three months of the new tax year from April to June.
They all claimed back £3,379 each on average from HMRC, but your refund could be significantly more or less depending on how much retirement income you took.
Typically, you can take the first 25% of your pension tax-free, and anything over that is taxed at the same rates as earned income.
But if you choose to take a lump sum you may be taxed at an emergency rate so you pay more than you should have.
You can claim your cash back from HMRC via a form online or using a paper one sent by post.
The exact form you need will depend on how you accessed your cash, but we explain it all here in our guide.
Claiming back uniform tax relief – up to £2,299.50
If you have to wear a uniform for work and you’re required to buy it yourself, wash it, replace it or mend it you can claim tax relief.
The amount you’ll get varies hugely, and depends on what industry you’re in and your tax rate.
You can either claim relief on the exact amount you’ve spent by providing receipts, or you can claim a flat rate expense.
You need to have used your own money to pay and your employer can’t have repaid you all the cash.
So, if you’re a basic rate taxpayer you get 20% back, high rate tax payers get 40% back and additional rate payers will get 45% back.
For most industries the flat expense rate is £60 per year, which means a basic rate taxpayer would get £12 of relief while an additional rate payer would get £27.
But some industries have rates that are significantly higher. For instance, the biggest flat rate expense is for pilots and uniformed flight deck crew.
If that’s your industry, the allowance is £1,022 per year, which gives £204.40 for basic 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 a pilot or crew member could net up to £2,299.50 with a five-year claim.
If you’re in the army, your uniform costs should already be accounted for in your tax code so you can’t make another claim.
You may be able to claim online, but if you usually self assess you’ll have to do it through your tax return.
Once you’ve claimed once, your tax code should be adjusted for future years so it happens automatically.
You may also be able to claim for other work-related expenses such as tools, vehicles, professional fees, travel and overnight expenses.
We outline the main types of relief and how to claim in our guide.
Get a council tax refund – worth up to £2,225.76
Council tax varies across the country meaning how much you pay is dependent on where you live.
Research from Which? suggest that people living in Nottingham have the highest bills, with a Band D property costing £2,225.76.
Those living in Westminster have the cheapest bills as a Band D property will set you back just £829.87 in council tax bills.
Whatever you’re paying, you’ll get 25% off your bill if you count as an adult for Council Tax purposes and either:
- You live on your own
- No-one else in your home 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 get 50% off if you live with “disregarded people” – which means someone who does not have to pay council tax.
A live-in carer and someone who is severely mentally impaired fall under this category.
Full-time students can get a 100% council tax discount,
If you receive certain benefits, you could be eligible for a 100% discount on your council tax bill, although you should check in with your council to see what help they can offer.
You can apply for discounts through the gov.uk website or by speaking to your local council.
You might also be able to claim money back if your house is in the wrong band.
You need to be cautious as bills can go up as well as down, but if you’re successful, the payout could be thousands.
For instance, a Martin Lewis fan got £7,625 back in council tax refunds – find out how to do it here.
Pensions tax relief – worth up to £10,000
When you pay into a pension, the government gives you tax relief on your contributions. In fact, paying into a pension is the most tax-efficient form of saving, according to the Institute of Fiscal Studies.
But if you’re a higher or additional rate tax payer, you may only get 20% tax relief added at source and you need to claim the rest yourself.
You can claim for additional tax relief through a self assessment return and you’ll get:
- 20% up to the amount of any income you have paid 40% tax on
- 25% up to the amount of any income you have paid 45% tax on
This means you could get an extra 25% worth of relief. The annual allowance for pensions is worth £40,000 so an additional 25% would stack up to £10,000 extra.
Season ticket loans and other salary sacrifice benefits – save thousands
If you’re company offers season tax-free season ticket loans, you can save hundreds on travel costs. You need to check if your employer offers the scheme.
Tax-free childcare schemes are another perk that can save you significant cash.
You can get up to £500 every 3 months for each of your children to help with the costs of childcare. This goes up to £1,000 every three months if a child is disabled.
You need to earn less than £100,000 a year to qualify and you can apply for the benefit online.
Rent-a-room relief – save up to £3,375
The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home.
If you’re an additional rate tax payer, that means you recoup £3,375 on that you would otherwise have paid in tax.
If you usually self-assess, you can make a claim on your tax return, if you don’t, you need to contact HMRC.
Charity donation tax relief
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 you 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.
If you don’t fill in a Self Assessment tax return, call HMRC to tell them about your charity donations.
Checking your tax code – thousands of pounds
The taxman could owe you serious amounts of cash if you’ve got the wrong code on your payslip.
If you’ve recently moved jobs, you might find you’ve been put on the emergency tax code, which means you could be paying substantially more that you need to.
You can check if your tax code is correct by using HMRC’s online tool. If it’s wrong, contact HMRC to let it know on 0300 200 3300.
If you’re owed cash, HMRC will send you a letter, so make sure it has the right address for you.
How much you could get back depends what tax code you were put on, your salary, and how much tax you should have been charged.
But you could be owed hundreds – or in some cases thousands – of pounds.
You can find out more about tax codes in our helpful guide.
Boris Johnson refuses to rule out more tax rises
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