Not just because getting a cheque in the post – or indeed anything that is not a bill – is a rare treat.
asserted
that → get → post
But because every year we are handing over more of our cash to the taxman – so it’s particularly sweet when the situation reverses.
asserted
situation → hand → taxman
HMRC is able to swipe an ever-growing proportion of our incomes thanks to frozen income tax thresholds, which haven’t budged since 2021 and won’t until at least 2031 under current plans.
asserted
which → swipe → plans
Had they risen with inflation, we would be able to earn an extra £4,900 a year by 2031 without paying and an extra £20,100 before being whacked with 40 per cent tax at the higher rate.
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we → rise → rate
Even if there are no further tax rises in today’s Budget, we’ll still be feeling the pinch for years to come.
asserted
we → be → years
HMRC is able to swipe an ever-growing proportion of our incomes thanks to frozen income tax thresholds, which haven’t budged since 2021 and won’t until at least 2031 under current plans
My advice?
asserted
which → swipe → plans
Millions of us are owed tax refunds that we don’t claim.
uncertain
we → owe → that
Don’t be put off thinking it’s a hassle – I did it last week and got a cheque for a few hundred pounds.
asserted
I → put → pounds
Yes, I had to phone HMRC to get it, but the time waiting on hold was surprisingly short – no more than ten minutes – and when I got through the representative was very helpful.
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representative → have → hold
Once I received the cheque, I didn’t even have to search around in vain trying to find a bank branch that hasn’t been shuttered to pay it into.
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that → receive → it
I was able to pay the cheque in through my online banking app by taking a picture of it.
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I → pay → it
My cheque was a refund of tax paid on charitable donations over several years.
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cheque → pay → years
When you give to a registered charity, those donations are supposed to be free of tax.
asserted
donations → give → tax
They should be so long as you pay through the Gift Aid scheme – a very straightforward process.
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you → pay → scheme
The charity gives you a form to fill in to make sure your donation qualifies – you need to input a few simple details such as your name and address.
You need to be a UK taxpayer to qualify – and your donations cannot be more than four times the amount of tax you paid in that tax year.
asserted
you → give → year
The charity can then claim back tax from HMRC.
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charity → claim → HMRC
It receives 20 per cent – the amount of tax that you pay if you’re a basic rate taxpayer – which amounts to an extra 25p for every £1 you give.
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you → receive → 1
So they’re quids in.
asserted
they → ’re → ?
However, if you’re a higher or additional rate taxpayer, you can claim the extra portion back that the charity hasn’t – in other words, the difference between the tax you’ve paid on the donation and what the charity has received.
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charity → ’re → what
Rachel received a cheque for several hundred pounds after making her claim
Say, for example, you donate £100 to charity.
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you → receive → charity
It can claim Gift Aid to bring your donation up to £125.
uncertain
It → claim → 125
However, the charity assumes you’re a basic rate taxpayer so only claims 20 per cent.
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you → assume → cent
If you’re a higher rate taxpayer you’ve paid income tax at 40 per cent on that donation – so you can claim back another £25 (£125 x 20 per cent).
uncertain
you → ’re → 25
You won’t get it automatically.
asserted
You → get → it
You must either declare it on your self-assessment tax return, or by contacting HMRC, as I did.
asserted
I → declare → HMRC
You can claim for donations made in the past four years.
uncertain
You → claim → years
You simply tot up how much you’ve given each tax year, phone up and tell HMRC a figure for every year.
asserted
you → tot → year
It will either give you a tax refund through your tax code or by sending you a cheque.
asserted
It → give → cheque
Pensions remain one of the most tax-efficient ways of saving.
asserted
Pensions → remain → saving
Every penny you pay in should be free of tax – unless you’re a very high earner.
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you → pay → tax
So, if you’re a basic rate taxpayer, if you put in 80p, the taxman will top it up to £1.
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taxman → ’re → 1
If you’re a higher or additional rate taxpayer, you only need pay in 60p or 55p respectively to be topped up to £1.
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you → ’re → 1
But not everyone gets the tax relief they’re due.
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they → get → relief
If you pay into a personal pension, a self-invested personal pension (Sipp), or have a workplace pension that is a so-called ‘relief at source’ scheme, you may have to claim any tax relief above the basic rate.
uncertain
you → pay → rate
You can do this through your self-assessment tax return or by getting in touch with HMRC.
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You → do → HMRC
More than £1billion of tax relief is potentially being left unclaimed every year – around 800,000 people are missing out.
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people → leave → relief
Think what that extra money could be doing in their pensions.
uncertain
money → think → pensions
Not only are they missing out on the tax relief, they are also losing out on the effect of compounding returns on them.
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they → miss → them
Also frequently overlooked is the marriage allowance, which allows couples who are married or in a civil partnership to lower their combined income tax bill
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who → overlook → bill
To benefit, one of you must normally have an income below your personal allowance – of £12,570 – and the other must pay basic rate tax.
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other → benefit → tax
…and 11 more, not listed.
The Aporia
