31 January 2022 marks the deadline to complete your online Self Assessment tax return for the tax year 2020/21. There are many reasons why you may need to complete a tax return, however there are some money saving ideas that could end up making you better off.
Home working allowance
You can claim £312 for 2020/21 for increased costs (e.g. heat and electric) incurred working from home.
You can either claim directly via the government website, or you can enter the £312 expense in ‘Other expenses and capital allowances’ in the employment section of your Self-Assessment return. If you have higher costs, you can claim, but you will need receipts to justify your claim.
Other job related costs
You can claim tax relief on the things that you buy and only use for work, provided that the costs are not reimbursed by your employer. This may include any professional fees or subscriptions, or tools or clothing needed to do your job. Enter the amount you have spent in the ‘Employment’ section of your Self Assessment tax return.
Check that any charity and sponsorship donations you have made by direct debit or on sites like JustGiving are set up, so that these organisations benefit from Gift Aid.
Many clubs and associations structure their organisation as a charity, e.g. Brownies, Guides Cubs, Scouts etc, so will qualify for gift aid. This means that HMRC will make an additional payment to these organisations if you have completed a Gift Aid declaration.
Higher rate taxpayers can claim back additional tax on any charitable gifts made using Gift Aid. For example, if you have given £200 to charity over the course of the year, the charity will have claimed £50 via gift aid and you can claim £50 back via Self Assessment.
If you are a basic rate tax payer but have a partner who is a higher rate tax payer, consider asking them to pay subscriptions or make charity donations in future so they can claim any additional tax relief.
Pension tax relief and charges
If you are a higher rate taxpayer and pay pension contributions out of your net income, you can claim tax relief on the difference between your marginal rate of Income Tax and the basic rate of 20%, on your pension contributions.
If your employer offers the salary sacrifice option to make pension contributions to the workplace scheme, this will reduce your tax and National Insurance contributions and all the calculations are made by the employer.
If you exceed the pension annual allowance (normally £40,000 but can be as low as £4,000 if you are already taking income or are a very high earner), you need to declare this on your Self Assessment return and pay any tax charge due.
If either you or your partner earns more than £50,000 in the tax year, any Child Benefit is tapered using the ‘high income child benefit charge’. Child Benefit is lost completely if you, or your partner, earns over £60,000 per year. If you are receiving Child Benefit and earn over £50,000 you must declare this via Self Assessment.
Transferable personal allowance
You may be able to save up to £250 by transferring or receiving £1,250 of your partner’s personal allowance. To qualify for the 2020/21 tax year, you must meet three conditions:
• You must be married or in a civil partnership
• The receiving partner must be a basic rate taxpayer (total earning between £12,500 – £50,000)
• The transferring partner must earn less than £12,500 – the 2020/21 personal allowance
P60 and P11D benefits
If you are employed, you will receive a P60 which confirms the tax code used for calculating your liability to Income Tax and P11D form, which shows any employer benefits which are subject to Income Tax. You should check that your P11D benefits and tax code are correct.
Finally, don’t forget to declare additional income
If you have any additional sources of income then don’t forget to declare this to HMRC. This could come from a variety of sources e.g. doing casual jobs such as gardening for others, making a profit from selling online, renting out a property or part of your home to a lodger or income from other investments such as interest or dividends.
HMRC provides guidance on whether you need to declare any additional income.
How you complete your tax return will depend on your personal circumstances – if you are unsure how to fill in any forms or whether you qualify for any reliefs you should seek advice from an appropriate professional, such as an accountant or tax adviser.
This article is intended to be for information only and should not be taken as financial advice.
Origen Private Client Solutions is a trading name used by Origen Financial Services Limited which is authorised and regulated by the Financial Conduct Authority. Our FCA registration Number is 192666. Our Registered office is: Ascent 4, Gladiator Way, Farnborough, Hampshire GU14 6XN and registration number is: 03926629.
CA7348 Exp 12/2022