Tired of paying too much taxes? Want to minimise your tax burden? Avail tax reliefs! These reliefs can be a great way to mitigate your taxes and to reclaim taxes you have already paid. Read on to find out what is tax relief, how it works, what types of tax relief you can claim and how to claim it.
Before getting deep into the discussion, first, you need to understand what is tax relief!
What is Tax Relief?
Tax relief is the amount of tax reduction from the taxes you pay to the government during a tax year. This relief is generally deducted from your gross pay. It implies that you pay less amount of tax than you need to. Along with your personal allowance, there are different tax reliefs you can benefit from.
These reliefs can be in different ways, it can be provided on your income, tax rebates, pension or if you work from home. You get some tax reliefs automatically on your income, however, there are some tax reliefs that you need to apply for.
How Does Tax Relief Work?
You can make certain payments like paying a loan or into a pension, paying money to someone else or any other payments, you can get tax relief on all of these payments. Income tax is directly deducted through PAYE from your employer.
On the other hand, if you are self-employed or earn from other sources, you can get tax relief from HMRC. As self-employed, you need to register for self-assessment and complete a return that will help HMRC to calculate how much tax relief you are eligible for.
What Types of Tax Reliefs You can Claim?
If you are an employee and get your income via PAYE, these are some of the popular ways to avail a tax relief on your income tax. These include:
- If you are using your car or van for work, you can claim tax relief on it (only if you go to a temporary workplace).
- In case, if you are using your company car and pay for its fuel for business purposes and are not reimbursed by the employer for business miles, you would be eligible for this tax relief.
- If you use public transport to travel to the temporary workplace, you may claim the cost incurred on transport.
Purchasing equipment and tools for the job do allow you to claim relief on the expense incurred. Typically, there are two ways to claim tax back for your tools.
- Tax code allowance: The value of this allowance varies from one industry to another. You don’t need to have receipts to claim it. And this allowance is used with your tax code.
- Capital Allowance: This allowance allows you to claim relief on the full price of your tools (you need to provide proof like receipts, statements of purchases). This allowance allows you to earn a higher tax rebate.
You can claim uniform tax relief if you wear unfirom or protective clothing at work and want to claim the cost for their washing and maintenance. For it, you can claim £60 per tax year (flat-rate expense).
Only higher rate taxpayers who contribute to private pension schemes can benefit from pension tax relief. You might not get his relief on public service or occupational pension scheme.
Working From Home
For using your personal home for work purposes, you can reclaim a tax rebate on it. This tax relief is available for household expenses you pay. It includes:
- Telephone, electricity, and gas bills
Mortgage or rent can’t be claimed back. These have agreed rates, if you want to claim more than the agreed rate then you need to provide evidence for it. Currently, this rate is £6 a week (from 6 April 2020).
In addition to these, there are many other tax reliefs available like charity donations, professional and subscription fees and buying equipment for work.
Quick Sum Up
To sum up the discussion of what is tax relief, you have now got enough information on what tax reliefs are available for employed persons in the UK. Tax relief can be a great way to reduce that tax you pay on your income and other payments. Note that we have just covered the most common tax reliefs available for employed persons in the UK.
We are a team of certified chartered accountants in London. Our mission is to help individuals, small businesses, and landowners to achieve their financial goals. So, don’t hesitate to get in touch with our team for queries and support. Let’s discuss the ways to reduce and save taxes!
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Disclaimer: This blog is just for your general information on tax relief.