Top 5 tax allowances that people forgetTips to help you cut your self-assessment tax bill
06 January 2016
Self-assessment taxpayers often overlook tax reliefs and allowances which they are entitled to claim.
Based on calls to the Which? Money Helpline, we look at five you might have missed.
1. Personal pension tax relief
When you contribute to a personal or stakeholder pension, your provider claims basic-rate tax relief at 20% from HMRC, boosting the amount that goes into the scheme. If you pay in £80, for example, the total value of your contribution is £100 (£80 + £20).
If you are a higher-rate taxpayer (paying tax at 40%), you can also claim a further 20% tax relief on the £100 total contribution, which means you get £20 deducted from your tax bill.
The deduction is not made automatically - you need to provide details on your tax return.
Useful tool: Which? tax calculator - work out your 2015 tax bill before submitting figures to HMRC. You can check your entries with our extensive calculator helpnotes.
2. Charitable donations tax relief
Charities receive basic-rate tax relief on gift aid donations (increasing the amount they receive) but higher-rate and additional-rate taxpayers are entitled to claim extra tax relief - deducted from their self-assessment tax bill.
If you make a donation of £80, for example, the charity claims basic-rate tax relief of £20 from HMRC - bringing the total value of your gift to £100 (£80 + £20). If you are a higher-rate taxpayer (paying tax at 40%), you can also claim a further 20% relief on the £100 total donation, which means you get £20 deducted from your tax bill.
Find out more: Call the Which? Money Helpline - your financial queries answered
3. Self-employed deductible expenses
If you’re self-employed, you can claim tax-deductible expenses which reduce the amount of income you pay tax on. These include:
- running costs of a car or other vehicle used for business, including petrol, car tax, insurance, repairs and servicing.
- travel and accommodation on business trips and between different places of work.
- heating, lighting, cleaning, water bills, rent, business rates, general maintenance for dedicated business premises, or a proportion of such costs if you work from home.
- employees' wages and redundancy payments, insurance, employers' National Insurance, pension benefits for employees, employee childcare provision and the cost of training.
A specific expense which the self-employed can claim is insurance - both professional indemnity insurance premiums and public liability insurance. If you pay for either of these, don't forget to include them.
Find out more: tax-deductible expenses - take a look at our comprehensive list
4. Landlords' deductible expenses
Landlords who declare rental income on a self-assessment tax return can claim allowable expenses which reduce the amount they pay tax on.
For 2014-15, you can claim for the following expenditure:
- water bills, ground rents and council tax (unless the tenant pays)
- gas and electricity bills (unless the tenant pays)
- normal repairs and decoration, but not the cost of improvements or additions to the property
- buildings and contents insurance premiums
- the interest (but not the capital) you pay on a mortgage for the purchase of the property
- what you pay for services you provide, including the wages of gardeners and cleaners
- letting or estate agent fees; the cost of advertising for a new tenant
- legal and professional fees when you renew a tenancy agreement
- wear and tear for furniture and equipment supplied with a furnished property equal to 10% of the net rent.
Find out more: tax allowances for landlords - see our extensive list
5. Employee deductible expenses
Employees are less likely to have allowable expenses than the self-employed, but some expenses incurred in your daily work are tax deductible. These reduce your taxable income from employment.
Deductions you can claim for are those your employer has not refunded. They might include, mileage allowance up to a set limit if you use your own car for work, the cost of replacing protective clothing necessary for your job, and fees and subscriptions to some professional bodies.
If you are obliged to wear a uniform or protective clothing, you can claim the cost of cleaning this (based on receipts) or use a flat rate, set by HMRC. This differs according to your occupation. The range (per year) is from £60-£140.
Don't miss the self-assessment tax deadline
Although you have until 31 January 2016 to submit this year's tax return, HMRC report that over 24,500 people submitted their tax return on New Year's Eve, 2,044 on Christmas Day and 5,402 on Boxing Day.