Income tax relief – lots of people don’t bother to claim, don’t be one of them!

If you think your employer has sorted all your tax for you – you may be wrong. If you have donated to charity – you can claim that donation against your earnings. If you think your pension’s working as hard as it can – you may be wrong.

Income tax relief – lots of people don’t bother to claim, don’t be one of them!

Below are the methods and scenarios of claiming income tax relief:


With the workplace pension and auto enrolment, most people receive tax relief from the Government on their pension contributions. Which is great. Basically “tax relief” is a refund of the tax you originally paid on money put into your pension, at your rate of income tax (20%, 40% or 45%). So to get £50 put into a pension, a tax-payer on the basic rate would need to pay in £45. A taxpayer on the higher rate needs to put £30 in and the top rate taxpayer, £27:50.

With auto-enrolment, you contribute 4% of your earnings, the Government adds 1% tax relief and your employer tops this up with 3%. It is basically as if your net contribution is doubled.

Auto-enrolment contributions are limited to the band of earnings between £6,136 and £50,000. Higher earners who normally pay 40% or 45% tax are entitled to higher rates of tax relief on their contributions. Some firms will claim back tax relief for higher earners automatically, but many won't – which means you'll have to claim the extra 20% or 25% via a self-assessment tax return.


Donations to charity from individuals are tax free. You can get tax relief if you donate:

  • Through Gift Aid
  • straight from wages /pension through Payroll Giving

Charities and community amateur sports clubs (CASCs) register with HMRC to be part of the Gift Aid scheme. When they’re registered, they can claim back the tax you’ve already paid on your donation. The charity or CASC will give you a form to sign and they must have an HMRC charity reference number. If you pay Income Tax above the 20% basic rate you can claim back the difference between the tax you paid on the donation, and what the charity got back, when you fill in your Self-Assessment tax return.

If your employer or pension provider offers a Payroll Giving scheme, any donations you give through the scheme will be taken before Income Tax is deducted. You still pay National Insurance contributions on the amount of your donation. But you won’t pay any Income Tax on the amount you donate. Which is wonderful.


Only applicable if you or the other party was born before 1935.


If you’re self-employed, your business has running costs and you are able to deduct some of these costs to work out your taxable profit. For instance, your turnover is £30,000, and you claim £8,000 in allowable expenses. Therefore, you only pay tax on £22,000 – your taxable profit. Here are some of the costs that are allowable expenses:

  • Business premises’ costs (heating / lighting / business rates)
  • Office costs (stationary / phone bills)
  • Training courses (relating to the business)
  • Travel costs (fuel / parking / buses / trains)
  • Staff costs (salaries / subcontractors)
  • Advertising and marketing (website costs)
  • Financial costs (accountants’ fees / bank charges / insurance)

If you use traditional accounting you can claim capital allowances when you buy something you keep to use in your business, for example equipment / machinery / business vehicles e.g. cars, vans, lorries.

If you work from home you can claim a proportion of your costs for things like heating, electricity, Council Tax, mortgage interest or rent, and internet and telephone use. Division of costs has to be suitable (size of room, how many days per month it’s being used for business purposes etc.)

Mr Financial recommends that if you are self-employed, you check HMRC thoroughly and keep a spreadsheet going throughout the year. It’s so much easier to gradually do it rather than leave it to a month before submission.

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