May 2025 Newsletter | Cylchlythyr Misol Mai 2025
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Do you complete a tax return each year solely to claim back tax relief on personal pension contributions? HMRC have launched a new online service to claim back tax on personal pension contributions for those whose only income is from employment (via PAYE), replacing the need to file an annual tax return. (Applies to higher-rate and additional-rate taxpayers only.)
Those with other income (such as self-employment, property income and/or investment income) must continue to file a tax return to claim back the tax relief on their contributions.
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You may be aware that if you earn small amounts from a side hustle, you do not need to complete a self-assessment tax return if your gross income from that work is less than £1,000 a year. The Government have announced that they will increase this threshold from £1,000 to £3,000 later this year.
However, this is already causing confusion, because the £3,000 threshold will only apply to the requirement to file a self-assessment tax return. If you earn more than £1,000 from any side hustle, and less than £3,000, you still need to declare this to HMRC and pay tax on the excess above the first £1,000, by contacting HMRC.
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The Government have announced plans to allow small pension pots of £1,000 or less to be consolidated together to minimise the risk of 'lost' pensions and to hopefully reduce the ongoing costs associated with having multiple pension pots.
An excellent idea in theory, however we await details of how this will work in practice. In reality, this will take many years to be implemented successfully.
Ask Huw & Aled
Q: I work as an employee and regularly drive across the country as part of my job. My employer reimburses me at a rate of 20p per mile. This seems like a low rate. Is there anything I can do?
A: HMRC have prescribed rates for allowable mileage costs, namely of 45p for the first 10,000 miles of travel, with 25p for any additional mileage. You can claim for the difference between the mileage reimbursed by your employer at 20p per mile and the HMRC rate of 45p/25p per mile by submitting a P87 form to HMRC.
In the last year, HMRC have seen a surge in these claims from employees and have introduced stricter conditions for a successful application. For mileage costs, you will need a detailed list of:
- reason for every journey
- postcodes for start and finish points for every journey
- evidence of employer reimbursements for any mileage costs (payslips or approved employer expense forms)
Unfortunately, HMRC have a long backlog in reviewing these claims and are currently very slow in processing tax refunds, with delays of around 4 months or more fairly common these days. Patience will be required!
