My early memories of money and tax take me back to the time of the Starbucks tax avoidance scandal and the first time I opened up my first proper payslip post-graduation only to see how much was going to the tax man. I remember calling up HMRC complaining about the difference in Gross and Net. So I think it’s fair to say we’ve all been there in feeling like we pay too much tax. However, I’m here to share the what and the how on living a tax-deductible lifestyle.
WHAT: Charitable Donations
If you earn more than £50,000 based on the current tax year bandings you can claim tax relief on charitable donations. For example, for every £1 you give to the charity you can claim back 25p
HOW: Claiming Tax Releif on Charitable donations
In order to apply the above to your finances, you can either complete the charitable giving section of the self-assessment form or if you’re impatient like me call HMRC to amend your tax code in which they will increase your personal tax allowance
For the past five years, I have been giving £30 a month to a particular charity and this was previously coming out of my salary post-tax but when I changed employers, I found out there was an option to give to the charity through Payroll Giving. This meant that my donations were taken out of my Gross which meant it become more tax efficient. By calling HMRC and informing them of this they increased my personal allowance as per above. My personal allowance is a lot higher because contributions to church also count
Note: Some people may be sighing that they don’t earn that much but you can claim this relief for up to 4 previous tax years. For example in 2017 if you were earning more than £43,000 you can claim that year’s relief now.
Other ways that you may be giving to charity:
Tax efficient outings: If you visit various museums, the zoo and other national historic sites this also constitutes charitable giving by way of your annual memberships and entrance fees. These organisations are all registered charities so you claim tax relief.
If you invest in small businesses (startups) that qualify for Enterprise Investment schemes and Seed Enterprise Investment schemes you can claim tax relief on investments held. EIS investments qualify for 30% and SEIS investments qualify for 50%. For example, by investing £1000 into a startup you may be entitled to tax relief of £300 or £500
HOW: Claiming Tax Releif on Charitable donations
In order to make this claim, you will need to wait for the company to issue you with the relevant share certificate documentation containing the EIS3 or SEIS3 form. You will then need to make a claim online when completing your self-assessment detailing details of each investment.
I have invested in a number of startups through Seeders and Crowdcube which have been eligible for SEIS and EIS. Do note that investing in such companies are high risk and investments held can be very illiquid (usually the only way you may get your money back is if the company floats on the stock exchange or is purchased by another company)
WHAT: Side hustle losses against other income
If you run a business or a side hustle alongside your full-time job you can claim the losses derived from running your side hustle against your salaried income for the same tax year. This will lead to a refund of some tax paid via PAYE
HOW: Claiming side hustle loss relief
- In order to make the loss relief claim, you will need to fill out the self-assessment form
- The side hustle or business in question will need to be a registered business
- The losses you can claim must be solely related to the business e.g computer equipment
I have been running a side hustle for the last two years which is not profitable yet having purchased a new computer, camera equipment and attended a few training courses to improve the quality of my services. However, using this tax relief has helped lessen the burden of the expenditure I have incurred in getting to where I am in the business. Note you need to operate your business with a view of making a profit or it will be treated as a hobby and will trigger some of HMRC audit which nobody wants.
Ceremony fees: If you decide to get married in a church it is possible for the associated fees e.g. registration fees to be waived and instead a charitable donation is made to the church which is a tax-deductible expense
Venue fees: If you decide to do your wedding at church or historical site (both need to be registered charities) which may serve as the venue for the reception. This may be a deductible expense if you negotiate with the relevant parties that a charitable donation will be made instead
Decorations: If you buy your decorations and donate them to a charity shop, you can claim the cost of the items as a charitable donation
As wedding season is in full swing I learnt a lot of tips and tricks from my brother and his fiancé who are also my co-founders. I know how expensive venues can be so here’s a wedding planning video for all future brides:
HOW: Claiming Wedding related expenses
In order to apply the above to your wedding, you will need to complete the charitable giving section of the self-assessment form.
That’s all for now, but stay tuned for my next post where I’ll be explaining why we all need to have a side hustle and some of the expenses you could be missing out on.
About the Author
Ashley Agwuncha is the co-founder of Money Medics, a platform that provides healthy money management to millennials. The medic of money medics, Ashley is a pharmacist turned money guru, who was able to build a substantial investment portfolio and purchase her first home all at just 25. She is now obsessed with empowering millennials with the right financial tools to take control of their present and secure their future
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