finance

finance Tax relief

for the Festive Season

Christmas is almost here which can be stressful enough, and with year-end filing and tax return fast approaching, that’s one thing you don’t want to be leaving until the last minute. All tax returns are due to be completed online by January 31, so make it your New Year’s resolution to avoid any unwanted penalties and ensure you are organised when it comes to meeting the deadline. There are a number of things you must take into consideration when filling out your tax return, so here is an overview of the essential elements you must remember to account for, as well as those all-important tax savings you could make.

Gift Aid Claims

It is common to gift to charities throughout the year, and these charitable donations are grossed up for tax purposes and added to the basic rate band to give an extra extension. This allows relief to higher rate tax payers of the gross donation. For example, a donation of £800 in a year would mean the basic rate band would be extended to £1,000 to obtain tax relief of £200. All donations qualify providing that they do not exceed four times the amount you have paid in tax during that tax year, and a gift aid declaration is made. When it comes to filling out your Self-Assessment Tax Return, items from the current year are normally only stated, however, when it comes to gift aid, you can also claim tax relief on donations you make in the previous tax year as long as you haven’t previously claimed them – I can’t stress the importance of this enough!

Pension Contributions

Another route to consider when obtaining tax relief is through pension contributions, which, similar to gift aid claims, are grossed up for tax purposes and added to the basic rate band to extend this further, which in turn grants relief for higher rate tax payers. This means that more income will be taxable in the basic rate band, in addition to the fact that any unused annual allowance from the previous 3 tax years can also be accounted for. You can contribute up to 100% of relevant earnings to your pension fund up to the annual allowance of £40,000. It is your responsibility to ensure that your contributions do not exceed the stated threshold, as HMRC will require you pay the annual pension charge on the excess. Further measures are coming into force in relation to pensions from 5 April 2016. We urge you to seek financial advice in relation to maximising your contributions.

High Income Child Benefit Charge

The High Income Child Benefit Charge was implemented by HMRC in 2013, meaning a taxpayer with an income in excess of £50,000 will have any child benefit received by either themselves or their partner taken back by £1 for every £100 in excess of £50,000. This charge is also relevant regardless of whether the child living with you is your own child or not, or if your partner claims and receives the child benefit for the child; it is the highest earner who must repay the child benefit. Some taxpayers choose to ‘opt out’ of receiving child benefit to avoid incurring this cost. equipment purchased and even mileage claims not fully reimbursed by the employer up to a maximum of 45p per mile up to 10,000 miles and 25p per mile thereafter. Basically, anything you have had to use your own money for to fulfil your professional duties and aren’t used in your personal life can be claimed in tax relief. For certain professions there is the flat rate job allowance which entitles you to claim an annual amount as a job related expense to cover things such as the washing of uniforms, and in this instance, no record or receipts need to be kept. These are just some of the key areas we recommend considering when filing your year-end self-assessment tax return, with many other opportunities for you to minimise what you pay in tax. In conclusion, our advice is to bear in mind all of the above points when filing your year-end tax return but most important of all – file it on time. We would recommend arranging a meeting with your business or personal accountant before the busy Christmas period takes over, even if it is simply to gain some tips and advice to make your filing process as stress free as possible. For some, lack of organisation may have already landed you in a stressful situation with your tax return, so we recommend dedicating some organisational filing skills to 2016’s New Year’s resolutions!

Employment Expenses

It is important that you remember to include all expenses when filing your year-end tax return. If you’ve been organised for the earlier part of the year, all of those receipts and records should have been saved and filed for an easy process! Often, employees are unaware of everything they are eligible to claim expenses on, for example, any professional subscriptions incurred, tools and

Les Leavitt

Leavitt Walmsley Associates Chartered Certified Accountants www.lwaltd.com