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Are you overpaying tax by ignoring a tax return?

How self-assessment could save you thousands

Tax returns 2017

Completing a tax return could be worthwhile, even if your taxes are collected automatically from your earnings or pension

Millions of higher-rate taxpayers could be overpaying their tax bills by failing to submit a tax return and claim valuable deductions and tax reliefs, new research from Which? has uncovered. 

In a survey of more than 4,000 consumers, three quarters (76%) of higher earners said they did not fill out a return voluntarily, believing that the tax automatically deducted from their salary through pay-as-you-earn (PAYE) means they’ve paid their taxes correctly.

But by doing so, many of these higher earners are failing to claim tax relief on pension contributions and charitable donations, as well as using allowances for car travel and home-working – all of which could reduce their tax bill and save them money.  

Use the Which? online tax calculator : our easy-to-use and jargon-free tax calculator offers personalised tax tips, and you can submit the form directly to HMRC.

Why higher-rate taxpayers need to complete a return

In the 2015/16 tax year, 4.6 million people paid higher-rate tax, according to HMRC

More than half (59%) of the high earners surveyed give to charity. Through Gift Aid, charities automatically receive basic-rate tax relief at 20% on donations, meaning they receive an extra £25 for each £100 donated. 

Higher-rate taxpayers can claim an additional 20% relief on their tax return, meaning every £100 donated cuts their tax bill by an extra £25.

Almost a third (30%) of the high earners surveyed contributed to a pension, and again could be missing on claiming tax relief on their contributions. 

Some types of personal pensions and company pension schemes only claim basic-rate pensions relief at 20%. Higher and additional-rate taxpayers in these schemes must complete a tax return in order to claim the additional relief.

Find out more: Tax reliefs – find out what you can claim for

Who else could be missing out?

Both basic and higher-rate taxpayers who regularly work from home or use a car for work may also be able to claim extra allowances via self-assessment.

Those who regularly work from home are particularly at risk of over-paying, as almost two thirds (62%) don’t complete self-assessment returns. You can claim for a proportion of your heating, electricity, internet and other expenses you incur for the time you work at home. 

Meanwhile, a fifth (21%) of people who pay tax via PAYE say they regularly use their car for work travel. 

Find out more: Tax-deductible expenses – find out what you can claim for


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How can I see if it’s worth completing a return?

Which? has partnered with SimpleTax to develop a tax calculator that shows how much tax you need to pay – as well as highlighting any allowances or deductions that you might miss. 

It’s free for anyone to use, though if you’re not a Which? member (or on a trial membership) you’ll need to pay a small fee to submit your tax return to HMRC via the calculator.

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