How to Claim Income Tax Reliefs

There are several different ways that businesses can claim Income Tax reliefs in the United Kingdom. Learn how self-employed workers can either pay less tax or get Income Tax back.

WHAT IS INCOME TAX RELIEF: The reliefs mean that you will either:

  • Pay less tax. A common reason is to take account of money spent on specific items. In most cases it would be on business expenses if you are self-employed.
  • Get tax back, such as in the form of a tax rebate.
  • Get the tax repaid in some another way (e.g. have it paid into a personal pension).

In fact, there are some types of tax relief that occur by automatic process. But, you must apply for the other types.

When Does Tax Relief Apply?

You can get tax relief in different ways. Typically, it applies to most charity donations, pension contributions, and maintenance payments. Most employees who work at sea outside of the United Kingdom can claim tax relief on their earnings.

Most self-employed people claim Income Tax relief on their work or business expenses. As a rule, you would be able to:

Claim Tax Relief through Charity Donations

As an individual, you can make tax-free donations to charities. That means you can get tax relief if:

  • Donate through Gift Aid.
  • You are donating straight from your wages or pension (through Payroll Giving).

Making Donations to Gift Aid

Some charities and community amateur sports clubs (CASC) register with HM Revenue and Customs. Doing so means they will be part of the Gift Aid scheme. It also means they can claim back the tax that you paid already through the donation.

The donor would get a form to sign from either the charity or the CASC. You can also ‘download example Gift Aid declaration forms‘ online. Be aware that the charity or CASC must have an HMRC charity reference number.

Note: It is not uncommon for a charity or CASC to get more tax back than you paid. In this case, HMRC can ask you to pay extra tax to cover the difference.

Paying Income Tax above 20% Basic Rate

Use your Self Assessment tax return to claim back the difference between the tax paid on the donation and the amount that the charity got back.

Call HMRC to inform them about a charity donation if you do not send in a Self Assessment tax return.

Getting the Married Couple’s Allowance

If you make donations through Gift Aid, and claim the Married Couple’s Allowance, your tax-free allowance may increase.

HMRC will adjust your Self Assessment tax return (if you send one) if it needs adjusting. If not, you would need to phone HMRC to inform them about the charity donations.

Payroll Giving Schemes

Most employers and pension providers offer a Payroll Giving scheme. Any donations made through the scheme get taken before they take off the Income Tax.

You would still need to pay National Insurance contributions on the donation amount. But, Income Tax would not be liable on the amount donated.

Claim Tax Relief through Maintenance Payments

As a rule, Maintenance Payments Relief reduces Income Tax. It would apply to you if you make maintenance payments to an ex-spouse or an civil partner. You would get it providing all these apply:

  • One of the partners was born before the 6th of April 1935.
  • You are paying maintenance under a court order after the relationship ended.
  • The payments are for either:
    • The maintenance of your ex-spouse or your former civil partner (if they did not remarry or start a new civil partnership).
    • Your children who are under the age of 21.

The value of Maintenance Payments Relief is 10% of the maintenance paid to an ex-spouse or civil partner. But, it has an upper limit of either £326 a year (or 10% of £3,260). Contact HM Revenue and Customs (HMRC) to claim the tax reliefs.

How to Claim Income Tax Reliefs in the United Kingdom