Little Income Tax Victories

HMRC has given Self Assessment taxpayers more time to ease COVID-19 pressures by waiving late filing and late payment penalties for one month. So you can file without penalty until 28 February while they use the whole of January to remove evidence of any parties they’ve had over the last two years.

There’s no real planning to be done at this point, save for making EIS investments, however that’s not for everyone. Plus we will be posting actions you can take before the end of this current tax year before April, so keep a look out for that.

So lets use that bit of extra time to make sure you aren’t paying more than your fair share. Look after the pennies and all that.

Here are some modest things to remember that may lower your income tax bill a little. Or at the very least, provide you with some “did you knows” to throw into conversations over the next month as the deadline approaches.

Income streams

Pull together annual statements for savings and current accounts, and any dividend statements.

Terrible savings rates mean that you might not have to pay any tax on that income: if you otherwise earn less than £12,570 you can earn up to £5,000 in interest without being taxed.

Above that, there are allowances for those earning less than £17,570, a personal savings allowance and a dividend allowance too.

The personal savings allowance means basic rate taxpayers get their first £1,000 of interest tax-free, while higher-rate payers get their first £500 untaxed. £2,000 of dividends are free of tax.

Outgoings

You might be able to offset some of your outgoings against earnings.

This is my favourite “did you know”! If you are an employee and have been forced to work from home because of the pandemic, you can make a claim for some of the associated expenses.

For the 2021-22 tax year you can make an immediate claim for relief on £6 a week expenses online.

For the self-employed, there are business expenses that can be claimed for including the cost of equipment and clothing, although I don’t think I’ve spent less of work clothes than I have these last two years despite being on first name terms with around 4 delivery drivers.

Include charitable giving

Higher-rate taxpayers who have given money to charity out of taxed income may be able to reduce their bill by claiming gift aid.

You will need to have claimed gift aid when you made the donation, which would have boosted the charity’s coffers by 25p for every £1. On your form you claim the difference between basic and higher-rate tax.

If you made a payment of £100 and the charity claimed 20%, you can claim the extra 20% of the total – £25. Regular monthly donations count, as long as you have signed up for gift aid, so include them.