Top Self-Assessment Tax Return Allowances: Are You Missing Out?

 

A woman is writing Taxes on a board
woman-writing-taxes

Did you know you can save your tax bills by claiming tax allowances? These allowances deduct money from your wages, savings, or income before you work out the amount of tax you owe. On the other hand, businesses can claim self-assessment tax return allowances against their sales, revenue, or income to reduce their yearly tax bills.

Whether you're a sole trader or self-employed, you can make more cash to grow your business and save money on taxes by claiming these allowances.

1. Personal Allowance

The personal allowance is the income you can earn yearly without paying tax to HMRC. For the year 2022–2023, the personal tax allowance is £12,570. You'll have to pay tax if you earn more than this amount.

Your taxable income should be £125,140 to qualify for the personal allowance.

2. Marriage Allowance

Those individuals who are married (or in a civil partnership) and have less income than the standard annual personal allowance (£12,570) can claim the marriage allowance to reduce their partner's tax. To do this, you can transfer £1,250 of your allowance to your partner, which may reduce their tax by £250 (or less). You can't claim this allowance if you're living with someone without any civil partnership or marriage.

3. Trading Allowance

Self-employed individuals or those who earn income from casual work like babysitting, gardening, etc., can get the trading allowance that offers up to £1000 tax exemption a year. It can help you reduce your tax bills and grow your business.

However, you won't qualify for the trading allowance if you earn income from:

· Your employer

· Your spouse's employer

· A company you own or control

· A company, your relative, owns or controls

Once you claim the trading allowance, you can't claim allowable expenses for things you purchase for your business. You'll need to claim allowable expenses if your expenses exceed £1000.

4. Property Allowance

Like the trading allowance, the property allowance offers a £1000 tax exemption per year on the income you receive from a property/land instead of casual work. You can claim both the property and trading allowance if you earn income from casual work/self-employment and property.

If you own land or property with others, anyone (or all) can claim the property allowance against your income share. For example, if you're earning £500 gross rental income on your shared property, you can claim the allowance against this amount, not the overall income generated on the property. Moreover, if your gross income exceeds £1000, you'll need to declare it to HMRC for income tax.

5. Dividend Allowance

Individuals who own shares in companies receive dividend payments, regardless of whether they run the company. You'll be eligible for the dividend allowance if these dividend payments are more than £2000. Otherwise, you don't need to pay any tax on dividend payments equal to or less than £2000.

It's also important to note that you can't receive any dividend payments if the company (where you own shares) isn't making any profit or has no retained profits.

Tax advisers in London
Tax-advisers

If you want more details on claiming these self-assessment tax return allowances, reach out to the tax advisors at IBISS & CO. They are trusted chartered tax advisers in Walsall, England, and also offer accounting services for businesses. Visit their website for more information.

 

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