10 ways to claw back money from HMRC
Around 12 million people submit a tax return every year, with many leaving it to the last minute or even missing the 31 January deadline altogether.
While it may be at the bottom of your to-do-list, particularly as you’ll have to pay a tax bill too, filing your tax return is also an opportunity to reclaim your money.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, shares 10 ways your tax return can actually make you richer:
- Claim extra pensions tax relief
Around 15% of higher rate taxpayers have no idea whether or not they’re getting 40% pensions tax relief. The best thing to do is ask your HR department.
If you have a trust-based workplace scheme or one which offers salary sacrifice, higher rate taxpayers get 40% tax relief automatically. But elsewhere, you’re probably getting tax relief at 20%, meaning you need to reclaim the difference on your tax return.
When you’re claiming extra tax relief on a pension, make sure you’re entering the gross value of contributions. This isn’t just a total of all the money you paid in: it’s the total of everything you paid in, plus tax relief at 20%.
- Claim Gift Aid
Gift Aid means a charity can reclaim 20% tax on your donation from the taxman. But if you’re a higher rate or additional rate taxpayer, you can reclaim the rest of the tax on your donation through your tax return. Only 22% of higher rate taxpayers bother to do it, but it can really add up. You don’t just get Gift Aid on cash donations – you also get it on gifts of land, property or shares you make to charity.
- Check if you’re better off claiming the flat rate
If you’re a sole trader, you have two options for claiming the cost of using your home or your car for work. You can calculate what you spend on it for work purposes, or you can claim a flat rate. Once you’ve worked out what you actually spend, you can use the expenses checker to see the best way to claim.
- Make a charity donation now to reduce your tax bill for last year
If you have the cash spare, you can make a donation now, and use it to reduce your tax bill for 2018/19 – because you can claim it on the previous year’s return. This is particularly useful if you paid higher rate or additional rate tax last year and a lower rate this year – because you can get more tax relief on your donation.
- Invest in an Enterprise Investment Scheme now and have it treated as made last year
Enterprise Investment Schemes offer 30% tax relief – to encourage adventurous investors to invest in younger and smaller companies. Generally you get this relief to set against your income in the year you invest. But if you’re paying a lower rate of tax this year – or your tax bill for this year isn’t big enough to claim all the relief – then you can set it against income for 2018/19 instead. These investments are only suitable to those prepared to accept a high level of risk, and should never be considered for the tax benefits alone.
- Don’t forget to divide joint accounts
If you have a joint stocks and shares account, you’ll need to split the total dividends and capital gains by the number of account holders, and only put your share on your tax return.
- Don’t overlook expenses you can claim for
If you subscribe to magazines or newspapers for work, you should be claiming these as expenses. You can also claim for any clothing you use exclusively for work (suits are excluded) such as those with logos, as well as protective clothes.
- Check you’re not on the official list of exceptions
Thanks to quirks in the system, there are a number of circumstances that means the online self-assessment calculations won’t be accurate for you or it won’t let you submit online. If you fall into any of these categories you’ll need to submit a paper tax return and do the maths yourself to make sure you don’t overpay tax. You technically should have done this by 31 October, but you’ll get until 31 January if you fall into one of these categories.
- Correct previous years
If you realise you’ve made a mistake in previous years, you can claim a refund for overpayments for any time during the past four years. You’ll need to write to HMRC explaining that you’re making a claim for ‘overpayment relief’, include proof, a signed declaration saying that the details you’ve given are correct, and outline how you want the repayment to be made.
- Learn from your mistakes
When you’re inputting gains from stocks and shares – and possibly discovering that you’re going to have to pay capital gains tax or dividend tax – it’s a helpful reminder that if you held these assets in stocks and shares ISAs, there would be no tax to pay. Even if your gains fall within the annual allowances, details of assets outside an ISA have to be included in the tax return.