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What tax reliefs can I claim?

By 19/12/2022June 12th, 2023No Comments
Tax reliefs for individuals in the UK

Are you looking for ways to reduce your tax bill or increase the amount of money that you get back from HMRC? If so, then it’s time to explore what tax reliefs are available and how you can use them to benefit yourself. In this blog post, we will provide you with an overview of some common types of UK tax reliefs available, as well as information on who is eligible, how they are applied, and more. So if you want to make sure that most of your hard-earned money stays out of HMRC’s hands (or alternatively ends up in yours!), read on!

Personal allowance

If you are a UK resident, you’ll be able to claim the income tax personal allowance. The standard personal allowance is currently £12,570 per annum, which is the amount of income you can earn without paying tax on. The current taxable income rates are as follows;

Personal allowance (tax free) – Up to £12,570 – 0%
Basic rate tax band – £12,571 to £50,270 – 20%
Higher rate tax band – £50,271 to £150,000 – 40%
Additional rate tax band – over £150,000 – 45%

Please note, the additional rate tax band is reduced to £125,140 from 6th April 2023.

At Direct Peak, we look to utilise the personal allowance in the most tax-efficient way, for most limited company directors this would be to take a salary through the company up to the standard personal allowance which is tax free, followed by dividends. Sole traders and partners in a partnership will automatically receive the first £12,570 tax free.

Employment allowance

UK businesses can claim the employment allowance, which allows eligible employers to reduce their annual employers national insurance liability by up to £5,000 per annum. If you are eligible, you’ll pay less employer’s class 1 national insurance each time you run the payroll until the £5,000 has been fully claimed, or the tax year ends. You can still claim the allowance if your liability was less than £5,000 a year.

You can claim the employment allowance if your employer’s national insurance liabilities were less than £100,000 in the previous tax year. If you have more than one payroll scheme, you can only claim against one of the payrolls.

At Direct Peak, if we prepare the payroll, we will automatically claim the employment allowance on your behalf – this means that when we prepare your payroll you will automatically pay less employer’s class 1 national insurance each time the payroll is run until the £5,000 allowance has been fully utilised.

Work from home allowance

If you are a business owner and carry out any trade from home, you will be able to claim a ‘work from home’ allowance, and there are three different ways you can claim the use of home allowance as follows;

  1.  Utilise HMRC’s simplified rate – HMRC have ‘pre-authorised’ a rate of £6 per week, which does not have to be authorised in any way. This is the simplest way to declare £312 of ‘use of home’ costs against taxable profits.
  2. Claim a proportion of household expenses – You can claim a proportion of allowable expenses according to the number of rooms in your property, and the amount of time you spend working in them.
  3. A formal contract with your own company – You could draw up a rental agreement between yourself and your limited company. This must be a commercial agreement, and market rent must be paid – although your company will receive tax relief on the rental payments, you will incur personal tax on the rent received on your annual self assessment return. You will need to consider the potential mortgage restrictions on ‘renting out’ a portion of your property, along with potentially paying CGT when selling the business portion of your property.

At Direct Peak, we would recommend that you claim the work from home allowance utilising option 2, and we have a handy ‘use of home’ calculator which we can send across to you to fill in to accurately calculate the proportion of allowable expenses to claim against your taxable profits.

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We offer affordable and reliable accountant services to help you manage your taxes, budgeting, and other financial needs. Our services are customised to suit your individual business needs, enabling you to make the most of your money for maximum profit and growth. Plus, with our free consultation and quote service, you can find out more about what we can do for you without any obligation – so why wait? Contact us today to start taking control of your finances and reap the rewards!

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    What is an accountant, and what do they do?

    An accountant is a professional who provides financial services, including auditing, taxation services, accounting services and consultancy to individuals, businesses and organisations. They are also responsible for providing advice on managing finances and investments. Accountants generally help their clients manage their finances more effectively by offering cost savings, tax savings, cash flow management and other related financial services.

    What services do accountants provide?

    Accountants provide a wide range of services depending on their qualifications and experience. These include bookkeeping and accounting; preparing financial statements, budgets and forecasts; advising on taxes; managing investments; helping with audit work; business performance evaluation; payroll services; corporate finance advice and support; VAT returns filing, HMRC investigations assistance and planning for retirement or inheritance tax liabilities.

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    Yes! A qualified accountant in the UK must comply with professional regulations set by their accounting body, which include upholding the highest professional standards, providing independent advice and adhering to a strict code of ethics. This guarantees that you can trust your accountant to handle your finances responsibly while maintaining complete confidentiality at all times.

    What should I look for when choosing an accountant?

    When selecting an accountant, it is important to consider whether they will have the relevant industry experience to best meet your needs; if you operate in a particular sector, then an accountant with specialist knowledge may prove beneficial in providing more tailored advice that considers industry standards and practices that would otherwise be overlooked by generic advisers.

    It is also important to consider how accessible they are – both physically (location) and virtually through online systems – as well as how well they communicate with their clients; regular updates should be provided so that clients are kept informed every step of the way throughout their engagement with the firm, and any queries/issues should be answered promptly within 24 hours where possible. Finally, ensure you understand exactly how much any advice will cost before signing up to ensure there are no unexpected bills down the line!

    How much does it typically cost for an accountant to provide services?

    The cost of hiring an accountant largely depends on a variety of factors, including the type of service required and the size of your business or organisation. Generally speaking, however, standard audit fees are likely to start at around £500 per day while standard bookkeeping & accounts preparation fees are likely to start at around £30-£50 per hour depending on experience level. To request a customised quote, feel free to contact us at Direct Peak Accountants. We’d be more than happy to help!

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