8 things you need to do before the tax year ends – or you could miss out on THOUSANDS of pounds

THE end of the tax year is fast approaching and it's worth checking these eight things so you don't miss out on money you're entitled to.

In the UK the tax year runs from April 6 one year to April 5 the next – not from January to December like a calendar year – meaning you have just days left to take action or risk missing out on thousands of pounds.

Each tax year you get certain allowances, like how much you can earn, save and put into your pension tax-free.

How much tax you have to pay can also change from one year to the next too.

For example, you can earn £12,500 this tax year before you start paying tax.

In the next tax year, it will be £12,570 but the Chancellor Rishi Sunak has said it won't rise after this, announcing in his Budget that it will be frozen until 2026.

Here's what you need to do before the end of the 2020-21 tax year on April 5 to avoid missing out on money you're owed – and it could add up to thousands of pounds.

1. Check your entitlement to the marriage allowance

Couples across the UK who are married or civil partnered could get tax back thanks to the marriage allowance.

This tax break could be worth £250 this year, or up to £1,188 over the past four years if you were entitled to it over this time but have never claimed.

To get it, one partner in the couple must be a non-taxpayer, and the other must be a basic rate taxpayer.

The partner who does not pay tax can transfer up to £1,250 of their annual tax-free personal allowance to their partner.

It means the partner who does pay tax can reduce their tax bill by £250 for the current tax year.

You can backdate claims for the marriage allowance up to four years.

In the previous tax year (2019-20) it would save couples £250, while for 2018-19 it was worth £238, for 2017-18 it was worth £230 and for 2016-17 it was worth £220.

You have until the end of this tax year to backdate a claim for the 2016/17 tax year.

You can apply for the marriage allowance tax break at gov.uk.

2. Check your tax code

Martin Lewis has warned workers to check their tax codes by April 5 – or you could miss out on thousands of pounds.

If your code was wrong and you overpaid tax in the 2016-17 tax year you'll need to claim it by April 5 this year.

Tax code mistakes can happen if you change job or started receiving benefits and it's up to you to spot any error and tell HMRC.

There's a limit of four years on claiming back overpaid tax, so it's your last chance to fix any error and get money back for 2016-17.

Here's how you can claim a rebate from HMRC if you think your owed tax back.

What do the letters mean in my tax code?

THE letters in your the code on your payslip indicates how much tax you have to pay. Here’s our guide to what each of the letters mean:

  • C Your income or pension is taxed using the rates in Wales
  • L You’re entitled to the standard tax-free Personal Allowance
  • M Marriage Allowance: you’ve received a transfer of 10% of your partner’s Personal Allowance
  • N Marriage Allowance: you’ve transferred 10% of your Personal Allowance to your partner
  • S Your income or pension is taxed using the rates in Scotland
  • T Your tax code includes other calculations to work out your Personal Allowance, for example it’s been reduced because your estimated annual income is more than £100,000
  • 0T Your Personal Allowance has been used up, or you’ve started a new job and your employer doesn’t have the details they need to give you a tax code
  • BR All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension)
  • D0 All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension)
  • D1 All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension)
  • NT You’re not paying any tax on this income
  • Tax codes starting with K mean you have income that isn’t being taxed another way and it’s worth more than your tax-free allowance.
  • W1/M1 If HMRC doesn't have enough information about you to send your employer the correct code, then you're given an emergency tax code which doesn't take into account any reliefs you may be entitled to. If so, W1 or M1 will appear at the end of your code

3. Claim PPI tax back

If you got a payout from PPI you might be owed tax back on top too.

While the deadline for PPI claims was in 2019, you can still back date tax claims up to four years.

When the payouts were made, banks refunded the PPI premium plus 8% in interest for each year since you took out the product.

The statutory interest part of your payout is liable to be taxed, and most firms deducted this automatically at the basic 20% rate before you got your money.

But since April 2016, more people have been due some of this tax back thanks to the introduction of the personal savings allowance.

This allows basic rate taxpayers to earn £1,000 a year tax-free interest on their savings, or £500 for higher-rate payers.

You can reclaim the tax on PPI payments going back four tax years, and the current tax year is due to end on April 5, 2021.

This means you only have days left to reclaim tax for any PPI payout you received between April 6, 2016 and April 5, 2017.

4. Uniform tax rebate

If you wear a uniform for work and your employer doesn't pay for it, you could be entitled to claim tax back on the cost.

You can claim tax back on £60 a year worth of uniform costs, so for basic rate taxpayers that's £12 a year and for higher rate taxpayers that's £24 a year.

It's another tax rebate you can claim for the previous four years, if you're entitled in the year your claiming for.

So there's a a deadline of April 5 for making a claim for the 2016-17 tax year.

5. Use up your ISA allowance

Savers will want to make the most of their ISA allowances before the end of the tax year.

An ISA (individual savings account) is a type of savings account where you don't pay any tax on interest earned.

Each year you get an allowance which is the total amount you can save into it each year to take advantage of this tax benefit.

You can save up to £20,000 each year into an ISA and if you don't use it up you can't carry it over to the next year.

First-time buyers saving into a Lifetime ISA (LISA) can save up to £4,000 into this account each year tax-free.

As the balance in an ISA grows though, it remains free from tax year after year.

How do you switch Isa provider?

IF you’re in the market for a new, better paying Isa, there’s one thing you shouldn’t do.

Never withdraw money from your Isa account to put it into your new one – if you do it'll lose its tax free benefits.

Instead you need to follow the simple transfer process.

Make sure that the new account you want to use accepts transfers (not all do) and then fill in the Isa transfer form with the new provider.

It will arrange for your savings to be transferred over, with the process taking no more than 15 working days.

And remember, you can only have one "active" Cash Isa per tax year.

If you put your cash in a bog standard bank account that's not an ISA, you'll be taxed on any interest over £1,000 if you're a basic-rate taxpayer.

For higher rate taxpayers it's £500 while additional rate taxpayers don't get this allowance, which is know as the personal savings allowance (PSA).

The ISA tax-free allowance is more generous than the PSA which is useful if you have more saved.

6. Use up your child's ISA allowance

Junior ISAs, known as JISAs for short, are savings accounts for kids that work in the same way.

But the amount you can save into one tax-free each year is less at £9,000.

It used to be much less at £4,368 but the amount was increased in the Budget last year.

7. Check your child benefit

Parents earning over £50,000 and who claim child benefit could owe money.

Child benefit is worth £21.05 a week for an eldest or only child and £13.95 a week for each additional child.

There was a change to the rules in recent years and many parents may not be aware of it.

It means that if either parent earns over £50,000 they lose some of the child benefit they are entitled to and have to pay it back.

This is known as the High Income Child Benefit Charge and effectively you lose all child benefit when you earn over £60,000.

A change in situation such as a salary increase or new partner could change entitlement to child benefit because of these rules.

Can I claim child benefit?

YOU can claim child benefit if you’re responsible for one or more children under 16.

You may also be entitled to the extra cash if the child you're responsible for is aged under 20 if they stay in approved education or training.

The payments are worth £21.05 a week for your eldest or only child, and then £13.95 a week per child for any additional children.

You may have to pay a tax charge if you (or your partner’s individual income is over £50,000. This is known as the ‘High Income Child Benefit Charge’.

This can result in a big bill to repay, even adding up to thousands of pounds for some families.

Before the end of the tax year if you find you earn over this amount it could be worth looking at ways to reduce your taxable income within the rules.

For instance, putting money into a workplace pension or using employer salary sacrifice schemes can reduce your taxable income without losing money.

Salary sacrifice is an agreement to reduce an employee's cash pay for non-cash benefits, like childcare vouchers or cycle to work scheme.

8. Use up your capital gains tax allowance

Capital gains tax is charged on the profit you make when you sell something that has gone up in value, such as stock and shares, artwork or even a second home.

The first £12,300 of profit is tax free but after that you'll be charged up to 28% depending on what rate taxpayer you are and what you sold.

If you're planning on selling something and the profits could be over this amount, cashing in at the right time can keep profits below the threshold or reduce your capital gains tax bill.

For example, cash in stocks and shares in two transactions over multiple tax years rather than a single transaction.

When does the tax year end?

The current 2020-2021 tax year comes to an end on April 5.

Many other countries around the world have tax years that run with the calendar year.

In Ireland, the US, France and Germany for example, it starts on January 1 and ends on December 31.

But in the UK for historical reasons, our tax year starts and finishes mid-way through.

When does the new tax year start?

The new tax year for 2021-2022 starts on Tuesday, April 6.

There are quite a few changes taking place that can affect your finances.

Some are directly related to tax and others are timed to come in at the same time.

April also brought with it some big bill changes. Here are the household costs that have risen this year – and how you can avoid them.

A number of big changes for drivers will also come into force from next week as the new tax year begins.

Universal Credit claimants and those on other benefits will see the money they get rise this April.

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