Five tax tips for self-assessment returns

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NFU Mutual Chartered Financial Planner Sean McCann shares five top tips for submitting your self-assessment tax return before the deadline on January 31.

1. Don’t forget to claim higher rate tax relief on pension contributions

Sean said: “Millions more people are paying a higher rate of income tax thanks to the long-term freeze on the £50,270 threshold, and the Office for Budget Responsibility estimate six million paid higher or additional rate income tax in 2022/23.

“When you pay into your pension, for every £80 you pay in, your pension provider will get another £20 direct from HMRC. If you pay 40% or 45% income tax you’ll need to claim the extra 20% or 25% tax relief via your tax return.

“Many higher and additional rate taxpayers do not do this, potentially missing out on thousands of pounds in unclaimed tax relief. Those who crossed the 40% threshold for the first time in the last tax year may be unaware that they are entitled to a rebate.

“Additionally, if you haven’t claimed on previous year’s tax returns, you can go back up to four years and claim any higher rate relief due by contacting HMRC direct.”

2. Get help with the cost of professional subscriptions

Sean said: “If you need to be a member of a professional organisation to do your job, and your employer hasn’t paid the subscription for you, you may be able to claim tax relief on the cost. There is a long list of approved professional organisations on HMRC’s website.”

3. Watch out for the child benefit tax trap

Sean said: “If you’re the highest earner in your household with an income of more than £50,000, and you or your partner claim child benefit, you’ll need to pay the child benefit tax charge. For every £100 of income you have over £50,000 you pay back one per cent of the child benefit. Once your income reaches £60,000 you repay the full amount.

“You can become subject to the charge if you moved in with someone who is claiming child benefit, even if they’re not your children. The good news is anything you’ve paid into your pension is knocked off your income before the charge is assessed. If it reduces your income below £50,000 you won’t need to pay the charge.  

“HMRC sent out more than 127,850 reminders in 2022/23 to people who needed to pay the High Income Child Benefit Tax Charge. Ignoring these letters could land you with interest payments and a fine. HMRC has collected nearly £20m in fines from people who failed to pay this tax since its introduction in 2013.”

4. Charitable donations

Sean said: “If you’ve given to charity via gift aid and you pay higher rate tax, you can claim back additional tax relief through your tax return.

“For example, if you donate £100 via gift aid, the charity will claim an additional £25, to make the total gift £125. If you pay 40% tax, you can reclaim up to an extra £25 for yourself (£125 x 20%).

“Previous research has indicated that only 22% of higher and additional rate taxpayers who donate to charity claim this relief because the perceived effort involved puts many people off.

“However, it is relatively simple to do via a self-assessment tax return and could be worth a lot of money for those who donate significant sums.

“Because more people are being dragged into paying higher rate of income tax, the amount of charity tax relief claimed by higher rate taxpayers has rocketed 34.5% in the past two years from £550m in 2020/21 to £740m in 2022/23.”

5. Don’t forget any capital gains

Sean said: “If you sold or gave away shares in the 2022/23 tax year, you need to declare and pay any tax due on gains made.

“Many people don’t realise that they can face a Capital Gains Tax bill when they gift shares or property - other than their main home - to anyone other than their spouse or civil partner.

“It’s worthwhile checking if you have any losses available to offset any potential bill. Any shares or investment held within an ISA or Pension are normally exempt from Capital gains tax.”

-ENDS-

Notes to editor 

OBR estimate 6 million paid higher rate or additional rate tax

HMRC sent out 127,855 letters on High Income Child Benefit Tax

Spokespeople available for interview

For further information, please contact:
Matt Wilson, Corporate Affairs Manager
Phone: 07890 255381
Email: matt_wilson@nfumutual.co.uk

About NFU Mutual: NFU Mutual offers a wide range of products, including general insurance, life, pensions, and investments. These products and services are delivered through our network of NFU Mutual Agent offices, as well as through our direct sales and service centres. With 300 local businesses located in rural towns and villages throughout the UK, NFU Mutual has become part of the fabric of rural life and remains committed to serving the needs of our members nationwide.

NFU Mutual is proud to deliver more than simply insurance. Making farming safer, supporting rural initiatives across the UK and helping to look after the environment are just some of the ways we do that. To find out more about everything we do to support our communities, visit https://www.nfumutual.co.uk/about-us/responsible-business