Understanding where the taxman could owe you money can be a positive way to help safeguard your finances and ensure you're keeping hold of more of your pay every month.
The money we take home at the end of every month is extremely precious to all of us, it is the lifeline that enables us to pay our bills, buy those little luxuries that we all enjoy and to help save for our future.
Making sure that you are aware of the different types of tax exemption that can help you to take home that little bit extra is therefore extremely important. As a result, we've put together this handy guide, which outlines some of the common forms of tax relief that police officers and their families can make use of.
What is tax relief?
Before we go into the specific forms of tax relief that officers might receive, it's important to understand what exactly is tax relief and what does it mean in practice?
Tax relief is a form of rebate offered by the government to specific individuals who qualify for additional forms of financial aid, which reduces the amount of tax they owe. It is a way for those who qualify to get tax back from HMRC, or to simply not pay it in the first place.
In many cases, tax relief can also be rolled over for up to four years. This means individuals who only now realise they qualify for this form of financial aid can claim for up to four years of rebates, but only if they had been a qualifying candidate throughout that time.
Tax relief can therefore provide a significant windfall for those who make use of it wisely. So, without further ado, here are some of the common forms of tax relief/exemption that police officers should be aware of.
Tax relief for uniforms
For police officers, the uniform is one of the most important items of equipment that you will own. It represents the stature and pride that officers should take in the job and the uniform is an instantly recognisable symbol of authority to the public.
You will be pleased to know that the MPS has taken care of this for you, they have long-standing agreement with HMRC where officers (up to and including Chief Inspectors) receive a tax dispensation every April in the form of a one-off payment of £140.00. If you work for another police service in the UK you should speak to your HR department to see if a similar arrangement is in place with the HMRC before doing anything else.
Work-related use of vehicles
To use a private car on duty an officer has to be an authorised user and needs to obtain this authority in writing from their Unit Commander.
The HMRC rules in relation to tax here are more complex than we are able to explain in this article. Therefore, should you ever be classed as an authorised user, you should seek clarification from your HR department.
Clearly this does NOT apply to your daily commute to and from work - this is classed as a form of private travel.
Another area where you can claim back tax is related to any form of charitable donation you make through your salary. Officers can claim tax-free status on these donations if they are donated either through Gift Aid or straight from your wages or pension, i.e. Payroll Giving.
If you fill in a Self Assessment tax return, your tax-free allowance will be adjusted automatically if it needs to be. If you don't, you can contact HMRC directly to tell them about your charitable donations and to ensure you are not paying undue tax.
You should contact an expert tax advisor to find out more information. This will ensure you are always paying the correct amount of tax on your charitable donations.
You might also be surprised to learn that one of the least-claimed forms of tax relief in the UK is also one of the most widely available. Marriage Allowance is a form of tax relief whereby one partner can transfer a portion of their tax-free personal allowance to their partner, if they do not use it.
Married couples and those in civil partnerships can transfer up to ten per cent of their personal allowance each financial year - in 2018/19 this equates to £1,185 of additional personal allowance, rising to £1,250 in 2019/20. This can be especially useful for families where one partner works and the other stays home to look after the children, or works part-time.
However, it is important to note that this form of tax allowance transfer is only available if the recipient is a basic rate taxpayer, not a higher or top rate payer. You should speak to a professional tax advisor if you are unsure if you qualify.
Council tax refund
While not technically a form of tax relief, one area where police officers who own their own home could make significant potential savings on their monthly tax bill is through the council tax they pay on their property.
Indeed, by applying for a tax banding review, homeowners could see hundreds of pounds knocked off their monthly council tax expenses, if the banding of their property is reduced.
Furthermore, not only can a reclassification of your council tax band provide a welcome boost to your finances moving forward, successful applicants will also receive a backdated rebate on the excess they have paid since moving into their home.
If you've never considered the council tax band of your home, then now could be the perfect time to do so. There's no guarantee it will be reduced, but you've nothing to lose by trying. You can find out more about this process at GOV.UK/challenge-council-tax-band.
Finally, perhaps one of the most profitable ways to make your money go further - and to avoid having the tax man dip his hand into your pocket - is to invest in a form of tax-free saving every month.
At Metfriendly, we offer a range of tax-free savings vehicles, all of which are tailored to help you meet your long-term savings goals and to make the most of the finances you have at your disposal.
For example, you could save up to £4,000 per year completely tax-free into a Lifetime ISA, with the Government then adding an additional 25 per cent (£1,000) to your savings pot. In addition, at Metfriendly, we offer a range of bonuses to further boost your saving potential.
What should I do now?
It can be easy to bury your head in the sand and simply ignore the fact you could be paying out more than you need to every month. However, at Metfriendly, it's our aim to ensure our members not only receive the best possible returns on their savings, but also that the wider police family’s financial wellbeing is well taken care of.
As a result, we hope this guide has sparked a sense of curiosity to make you go out and look for those savings that could make a real difference to your monthly income. Whether it's saving for your future or just having that little bit extra to spend on life's luxuries, paying less tax can be a great way to support your financial goals.
If you'd like to find out more about the wide range of products and services that Metfriendly has to offer, please make an appointment to speak with one of our friendly field staff or sign up to attend one of our pre-retirement seminars.