Top 6 Self Assessment tax return allowances: are you missing out?

With costs rising significantly and budgets already stretched, people and businesses quite literally can’t afford to waste any money. Spending in all areas is under close scrutiny, with people and businesses looking for ways to minimise their costs.

Tax is one key area where money can be squandered needlessly and that can result when people don’t know the full range of tax allowances that they can claim. Tax allowances are amounts of money that can be deducted from someone’s wages, income or savings, before the amount of tax they owe is worked out.

Similarly, businesses (including self-employed sole traders and members of ordinary partnerships) can claim Self Assessment tax return allowances against their income/revenue/sales to reduce their profits and the size of their yearly tax bills. Basically, the more tax return allowances and reliefs that you claim, the lower your tax bill. That can mean you take home more or that you have more cash to run and grow your business.

Here we lift the lid on the top 6 Self Assessment tax return allowances, so you can make sure you’re claiming all of the key tax return allowances to which you’re entitled.

1. Personal Allowance

The obvious place to start. The Personal Allowance is the amount of income that someone (including sole traders) can earn or receive before they must pay Income Tax to HMRC. In the 2024/25 tax year the standard annual Personal Allowance is £12,570.

Need to know! The Personal Allowance decreases by £1 for every £2 of income you receive over £100,000. If your taxable income is £125,140 or more, you don’t qualify for Personal Allowance.

2. Dividend Allowance

If you own shares in a profit-making company, whether one you’ve set up and run or not, you may receive regular or occasional dividend payments. If so, you can claim the Dividend Allowance. For the 2024/25 tax year, the Dividend Allowance is £500. It means you don’t pay any tax on dividend payments you receive up to £500.

Need to know! If you’ve started and run a limited company that is not making a profit and has no retained profits, you cannot make share dividend payments to yourself or others.

3. Trading Allowance

The Trading Allowance is a tax exemption worth up to £1,000 a year for those who earn income from self-employment or casual work (eg gardening, decorating, babysitting, etc). You can’t use the Trading Allowance if you earn trade income from a company you or someone related to you owns or controls; nor can the income come from your employer or your spouse or civil partner’s employer. Moreover, members of an ordinary partnership cannot claim the Trading Allowance.

Top tip! If you claim the £1,000 tax-free Trading Allowance, you cannot claim allowable expenses for things you buy for your business. If your expenses are more than £1,000, you’d be better advised to claim allowable expenses.

4. Property Allowance

This is very similar to the Trading Allowance, but it’s a £1,000 a year tax exemption for those who earn income from land or property rather than self-employment or casual work. If you own a property with others, each or all of you can claim the £1,000 Property Allowance against your share of the gross rental income. If your annual gross property income is £1,000 or less, you don’t need to tell HMRC about it, providing that you’re able to claim the Property Allowance. If it’s more than £1,000, you must declare your property income to HMRC.

Need to know! If you earn income from self-employment/casual work and land or property, you can claim both the Trading Allowance and the Property Allowance.

5. Marriage Allowance

If you’re married or in a civil partnership and your income is less than the standard Personal Allowance (£12,570 a year), you may be able to claim Marriage Allowance to reduce your spouse’s/partner’s tax (or vice versa). Marriage Allowance enables you to transfer £1,260 of your Personal Allowance to your spouse or civil partner, which can reduce their tax by up to £250 in the tax year.

Need to know! If you’re living with someone, but you’re not married to them or in a civil partnership together, you cannot claim Marriage Allowance.

6. Mileage Allowance

Rather than keeping track of actual costs you incur to pay for business journeys by van, car or motorbike, HMRC allows you to claim Mileage Allowance, which is a flat-rate scheme that offers a much simpler way of claiming for business journeys made by road. It covers fuel as well as other vehicle costs, including repairs and maintenance, MOT, servicing, etc.

Sole traders can claim a mileage allowance of:

• 45p a business mile travelled in a car/van for the first 10,000 miles and
• 25p a business mile thereafter or
• 24p a mile if you use your motorbike for business journeys.

You can claim a further 5p per mile for each additional passenger as long as they work for your business (2023/24 tax year for all figures). 

Need to know! You cannot claim the Mileage Allowance for vehicle journeys between your home and usual place of work (eg premises), because this is simply your commute.   

Self Assessment tax return allowances you may not know about

Under the Rent a Room Scheme, you can earn up to £7,500 a year tax-free from letting out furnished accommodation in your home. You can let out as much of your home as you want.

If you or your spouse are registered blind you can claim the Blind Person’s Allowance, which would give you an extra £3,070 of tax-free income in 2024/25. Some of the allowance can be transferred to your spouse if you do not use it all.

Additional allowances are available for interest from savings. If you pay the basic rate of Income Tax, the Personal Savings Allowance allows you up to £1,000 of tax-free interest; higher rate Income Tax payers get £500 a year tax-free; additional-rate Income Tax payers don’t get any tax-free allowance on savings interest.

Those with a relatively low income but high-value savings may also qualify for the starting rate of savings, which offers up to £5,000 of tax-free interest. The more you earn from other sources (eg wages or pension), the less your starting rate for savings. You’re not eligible if your other income is £17,570 or more. And every £1 of other income above your Personal Allowance (£12,570) reduces your starting rate for savings by £1.

GoSimpleTax offers you an easier and quicker way to complete and file your tax return. It’s simple to use, offers hints and tips, enables you to store receipts for your allowable expenses and is backed up by a highly experienced support team. Try it for free now

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.