Paying tax is a legal requirement but it can sometimes be a painful one, especially if you’re still struggling financially after Christmas.
But did you know there are a number of tax rebates which could save you or reimburse you hundreds of pounds. Very useful, especially when those debts are starting to pile up.
Indeed, many people in the UK are actually paying too much tax and although that means you might end up getting some back in the form of a tax rebate later in the year, you can also reduce the amount taken by HM Revenue & Customs (HMRC) by making use of the numerous tax allowances on offer.
Millions of pounds of entitlement reportedly goes unclaimed each year, yet there are seven potential ways you can claim some money back from the taxman.
It sounds obvious but you’d be surprised how often the HMRC has the incorrect tax code for you.
Usually, this happens when people switch jobs and the most common mistake is to put someone on an emergency tax code when they get a new job or change their job title. That could make you £2,700 a year poorer – as you lose your £11,500 a year personal allowance and all your income is taxed.
If you receive an income via PAYE (pay as you earn) be it earned, or from a pension, then check your tax code. You will find your code on your P45, the PAYE Coding Notice sent by HMRC or on your wage slip. For more information visit Gov.uk/tax-codes/overview.
If you think you might be on the wrong council tax band, it’s generally worth challenging it to see if you’re paying too much.
Just ensure you do a bit of research first so you don’t risk of being moved into a more expensive band. According to figures though, an increase only happens in 0.1% of cases.
And considering that, in 2016, £3.6million was reclaimed by people who challenged their council tax band and received a reduction, this is definitely worth a try if you think you’re overpaying.
Child benefit is available to parents of children under 16 (or 20 if still in education), unless one of you has income of £50,009 or more.
This is paid at £20.70 a week for your oldest child and £13.70 a week for other children.
Child Tax Credit is another benefit which helps with the costs of raising a child and depends on your income and circumstances. You can claim Child Tax Credit even if you’re not working.
Marriage allowance is a little known tax break which is well worth looking into if you’re married or in a civil partnership.
Marriage Allowance lets you transfer £1,150 of your Personal Allowance to your husband, wife or civil partner if they earn more than you, and can reduce their tax by up to £230 per year.
Figures from HMRC show more than 2.2 million couples across the UK have boosted their finances through this allowance scheme, but around two million married and civil partner couples are still yet to claim.
If you wear a uniform at work, and have to wash, repair or replace it yourself, you may be able to claim tax relief on the costs.
The amount you’re able to claim tax relief on depends on your industry.
The standard flat rate expense allowance for uniform maintenance is £60, which means basic-rate taxpayers can claim £12 back (20% of £60), while higher-rate taxpayers can claim back £24 (40% of £60).
Pensions can often offer unrivalled tax breaks and are a good way to save extra money for your retirement, although remember you won’t be able to access the money until you hit 55.
A pension fund grows tax-free, and any contributions you make into the plan also receive income tax relief at your highest marginal rate. As a basic-rate taxpayer you get 20%.
The maximum someone can contribute to a personal pension is 100% of their earnings – or £3,600 a year – whichever is greater. This is capped at the Annual Allowance of £40,000 for most people.
Last year, the government introduced lifetime ISAs – or LISAs. Aimed at those aged between 18 and 40, they’re designed to encourage saving for retirement, and to make it easier to take the first step onto the property ladder.
You can save £4,000 a year into a LISA and the government will top up your contributions by 25% every year until you turn 50. Theoretically, this means you could gain £1,000 from the government every year for decades.
However, you won’t be able to access the savings until you’re 60, which compares to 55 for pension funds so definitely don’t use it as your sole retirement fund.