Taxes can be a hassle and many people wind up putting them off, but it’s important to set some time aside to look at what you owe and what you’re receiving. This isn’t just because you need to be taxed the right amount, but because you could also find out about certain allowances you will be entitled to if you are of a certain age.
Here are five tips for getting the most out of your annual taxes:-
1. Claim back overpayments
You may find that in the past you’ve paid too much in taxes because you haven’t been claiming relevant allowances and are therefore entitled to the credit. It may sound unfair, but don’t expect to be informed if you’ve paid too much in tax. The government are happy to hold that money indefinitely until you ask for it back.
The money you have in credit won’t be considered when calculating your next tax bill either. Every now and again, get in touch with HMRC and ask if you’re able to claim back any of the money you’ve paid them in the past.
2. Research what you’re entitled to
There are plenty of allowances that you might be entitled to depending on your age, whether you’re married, a widower or suffer from an ailment. For example, if you’re blind or suffer from impaired vision, you may be entitled to Blind Person’s Allowance, which grants you an additional £2,290 a year.
Couples have unique allowances that they can apply for too. If you or your partner was born before 6th April 1935, you can receive Married Couple’s Allowance, which will cut your yearly tax costs by £835.50 a year.
Contact HMRC and explain to inform them of any ailments you have and see if there is an allowance you will be entitled to.
3. Alert HMRC to any changes
To make sure that you’re getting taxed the right amount you need to make sure that HMRC are up to date with your current situation. Anything relating to your job can affect how much tax you have to pay.
If you’re soon to retire, you need to let them know that you’re going to start receiving pension credit to help them recalculate your tax bill. The same applies if your work hours change.
Certain circumstances can lead to a larger tax bill, so it’s tempting to refrain from telling HMRC these details, but if you put it off they will find out eventually and end up sending you a bill demanding tax back.
4. Check your tax code
An incorrect tax code will lead to an incorrect tax bill, which could lead to overpayment or underpayment of taxes over a long period of time. The tax code basically instructs your pension company and your employer how much of your wage you’re entitled to tax-free.
With the wrong code, you could wind up with a smaller pay-check at the end of each month, so double-check with HMRC and get the code amended if you think it’s wrong.
5. Mark down the important dates
If you have worked as a sole trader or a freelancer for a period of time then you will be required to carry out a Self Assessment, which lists the income you’ve made and ensures that you are taxed properly for it.
There are specific deadlines for handing in your Self Assessment depending on what tax year you’re claiming for. The current tax year is between April 6th 2016 and April 5th 2017, and anything you earn between then needs to be written up and sent away by 31st October.