9th January 2017
Higher-rate taxpayers who do not submit a tax return could be overpaying tax, according to Which?
A survey on 4,000 people found that 76% of high earners do not complete a return as they believe tax is automatically deducted from their earnings or pension through PAYE.
This means that individuals could be failing to claim tax relief on pension contributions and charitable donations.
For example, charities receive basic-rate tax relief at 20% on donations, resulting in an extra £25 for each £100 donated. Higher-rate taxpayers claim an additional 20% relief when filing a tax return, meaning each donation reduces their bill by £25.
30% of those high earners surveyed contribute to a pension and could be claiming tax relief on their contributions through self-assessment.
Research by HMRC found that 4.6 million people paid higher rate tax in the 2015/16 tax year. 59% of those who made charitable donation did not claimed tax relief.
John Cullinane, tax policy director at Chartered Institute of Taxation, said:
“Anyone who is self-employed is required to file a self-assessment return, whether they are a sole trader or in partnership. This includes people who work in the ‘Gig Economy’ or have a second income from trading on eBay and similar websites.”
Get in touch with us today about self-assessment.