With the new tax year about to kick in on 6 April, it’s time to claim refunds for any overpaid tax in 2017/18. According to the HMRC 5 million people in the UK pay too much tax each without realising it.
Tax rules are complex, and with over 1000 pages of Self-Assessment legislation alone, it’s no wonder that many mistakes are made when claiming a tax refund
With this mind, here are the five most common mistakes people make when claiming a tax refund.
1. Make sure you understand the Temporary Workplace Rules.
You get tax relief on journeys to and from temporary workplaces. Generally, that means somewhere you're working for 24 months or less. It seems simple, but it can get fiddly. For example, if you switch to another nearby site after 2 years and your travel costs are similar, the taxman might argue it doesn't count as separate. Getting this wrong can mean HMRC demanding your refund back up to a year later. If you’ve already spent the money, that might prove very difficult.
2. Receipts are money. Don’t throw them away.
If you don’t have receipts, bank statements or other documents to show as evidence, HMRC aren’t going to refund you. Without a complete record of your work spending, you're throwing money away. The average UK worker has travel and subsistence expenses of £3,363 per year. That comes to £672.60 in refunds on the tax paid.
3. Food logs aren’t just for fitness fanatics.
Travelling for work often means eating away from home. An average UK worker spends £5-£10 on food at work per day. That means spending £1200 - £2400 a year with around £250–£500 forked over to HMRC in tax, but you need evidence to claim it back. Daily costs vary, but recent research has found the average person shells out a staggering £90,000 on food during their working life – enough to pay off a typical mortgage 6 years early!
4. If you wear a uniform and aren’t claiming, you’re missing out.
There's a particular tax relief for people who clean, repair or replace specialised work clothing. The rules aren't always clear, though, costing people hundreds of pounds in tax refunds. To claim a rebate, your uniform must be a necessary part of your job. Wearing a chicken costume when you're a performer in an amusement park would probably qualify. Wearing one when you're an accountant might not.
One odd point to remember is that you generally can't claim for the initial cost of the clothing. Repairing, cleaning or replacing it is usually fair game, though.
5. You can claim for travel even if your employer pays some of your costs.
Claiming mileage relief is a way of bringing down your tax bill when travel's essential for your work. You may already get a mileage allowance from your employer for this. However, if you're getting under the HMRC rates, you could have a tax rebate claim. The full HMRC mileage allowance is 45p per mile for the first 10,000 miles, then 25p for any travel after that. The most obvious thing you're going to need for your claim is a full record of all your work travel. Make a note of all the places you drove or rode to and the dates you did it.
Submitting your own tax refund means shuffling complicated paperwork. That's why 52 per cent of tax refund claims went through tax agents last year.
If you don't know your way around HMRC, you might miss out on a refund, find yourself being chosen for an HMRC enquiry or get tangled up in Self Assessment. If you’re not 100 per cent confident, get an expert to help.
Bradley Post is managing director at RIFT Tax Refund.
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