If you’re leaving your self-assessment tax return until the last minute, then you’re not alone. HMRC are expecting more than 12 million people to fill a tax return by 31st January 2023 and 5.7 million people still haven’t submitted one*.
Completing a tax return can be a long task, but leaving it to the last minute could mean that you forget vital information that could decrease the amount of tax you owe.
The deadline for filing your 2021/22 tax return is 31st January 2023.
Below are some of our top tips to help you save tax.
Tip 1 – Claim for higher rates of tax relief on your pension contributions
Tax relief and allowances with regards to pensions are complex and people often get confused with tax relief on personal pension contributions.
If you are a UK resident and you make a personal pension contribution, you will automatically receive tax relief on your contribution at the basic rate of income tax which is 20%. For example, if you pay in £8,000 you will automatically get another £2,000 paid in by the government.
However, if you are a higher rate taxpayer at 40% or an additional rate taxpayer at 45% you can get tax relief at the rate you pay from the government. However, to claim this you must fill out your tax return to let the government know that you made a pension contribution. You will need to include the gross value of your pension contributions of what you paid in plus the 20% tax relief. The additional tax relief that you are owed will either be paid to you directly or HMRC will adjust your tax code or reduce your tax bill. For example, if you are a higher rate tax payer at 40%, a pension contribution of £10,000 will only cost you £6,000.
This is why pensions are a very popular way for people to save and invest in their future as it is the most tax-efficient way to save.
For more information or to review your existing pensions, you can book a no-obligation meeting now with a financial adviser at Four Wealth Management online or by calling us on 0117 973 0500
If you are self-employed then you will be responsible for paying the costs of running your business. You can deduct certain business expenses from your profits before tax which is a good way to reduce the amount of tax you owe.
Many people often fail to claim all of their business expenses, for example they may not claim for their training course or clothing expenses.
There is a full list of what you can claim on the government website which you can use to check you are claiming everything you are entitled to.
If you work at home then you can also claim a proportion of these costs, for example electricity, gas, phone line and internet.
Book a no-obligation meeting now
Tip 3 – Correct and claim against previous tax years
If you have made any overpayments in the last four tax years then you can claim a refund. You can do this by writing to HMRC and claim for overpayment relief. You need to prove that you overpaid on tax through self-assessment and sign a declaration that the details for the refund you have provided are correct.
Tip 4 – Make next year’s tax return easier
Your tax return relates to the previous tax year so making a pension contribution today could help to reduce your tax bill next year.
If you do not already have a pension, you should consider opening one to take advtange of the generious tax relief benefits as explained above.
Book a no-obligation meeting to discuss starting a pension or making a pension contribution
Subject to certain limits, you can contribute a maximum of £40,000 per tax year to your pension and still receive tax relief. However, you may not be aware of the carry forward allowance. This means if you have unused allowances from previous tax years then you could contribute up to £160,000 in one payment.
Book a no-obligation meeting to discuss carry forward allowances
Tip 5 – Speak to an accountant
If you are unable to complete your self-assessment yourself or your finances and circumstances are particularly complex then you should consider speaking to an accountant to get them to complete your tax return for you. This will help make sure that nothing is missed.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
*Gov, UK, ‘Almost 5.7 million customers still to file their tax return’, 2023
