Tax relief or Tax reducers can benefit UK taxpayers as it can reduce the amount of tax you pay or claim back tax you’ve already paid, potentially providing you with a lump sum.
Tax Relief means :
Receive tax back or get it reimbursed in another way, so that you pay less tax to account for money you’ve spent on particular things, like business expenditures.
Some tax reliefs are automatic, while others require an application.
Tax relief applies to Pension contributions, charitable contributions, maintenance payments, and time spent working on a ship outside of the UK.
It also applies to expenses for employment or business.
If you are Self-employement, you can receive tax relief on the expenses you incur to run your business(a sole trader or partner in a partnership).When you are employed and travel and use your own money to buy things for your job.
Below as some examples:
Uniforms and tools: Cleaning, repairing, and replacements of uniforms, and repairing or replacing tools you need for your job. This can be anything from a pair of scissors to electric machinery.
Vehicles: If you use a vehicle for work, you may be able to claim tax relief. However, how much you can claim will depend on the vehicle and whether you own or lease it, or whether it’s a company vehicle.
Travel and overnight expenses: You can claim tax relief on travel and overnight expenses for your work. This includes transport costs, accommodation, food and drink.
Professional fees and subscriptions: If you’re required by your company to subscribe to approved organisations, you may be eligible for tax relief.
Working from home: You may be able to retrospectively claim working from home tax relief if you were required to work from home during the pandemic in 2020/21 and 2021/22. However, you can only claim working from home tax relief for the current 2022/23 tax year if your job requires you to live far away from your office or your employer does not have an office. Tax relief can be applied to extra bills you may need to pay, such as telephone, electricity and internet.
Buying other equipment: Some equipment you need for work, such as a computer, is eligible for tax relief.
Pension contributions: You can either let your employer take pension contributions out of your pay before deducting income tax, or via your pension provider who can claim 20% of your tax back and add it to your pension pot.
Charity donations: Donations to charity by individuals are tax-free. Donating through Gift Aid or Payroll Giving (which when you donate directly from your wages or pension) means you can get tax relief.
How far back can I claim tax relief?
You can claim tax relief for expenses made up to four years previously.
Tax Reducers :
Married Couple’s Allowance (MCA) and Marriage Allowance (MA) – MCA can be claimed when you are married or in civil partnership, you are living together and one of you was born before 6 April 1935. Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner and this reduces their tax by up to £252 in the tax year .
Enterprise Investment Scheme (EIS) – If a taxpayer subscribes to EIS shares a tax reducer is given which is currently 30% on the lower of the amount invested or £1 million
Knowledge Intensive companies – tax reducer at 30% on the lower of the amount invested or £2 million
Seed Enterprise Investment Scheme (SEIS) – The tax reducer percentige here is 50% and applies to the lower of the amount invested or £100,000.
Social Investment (SI) – If a taxpayer subscribes for shares or makes a qualifying debt investment in a social enterprise, a tax reducer of 30% is given on the lower of the investment amount or £1 million. In this instance, qualifying debt investments must be in the form of a debenture that offers no return other than at the commercial rate and carries no charge over assets. It must also rank equally amongst other shares.
Venture Capital Trust (VCT) – A taxpayer subscribing to VCT shares is given a reducer of 30% on the lower of the invested amount or £200,000.
Individual Savings Accounts (ISA ) – you do not pay tax on:
~ interest on cash in an ISA
~ income or capital gains from investments in an ISA
~ If you complete a tax return, you do not need to declare any ISA interest, income or capital gains on it.
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