Tax code wrong? It could be doing more damage than you realise
Studies show that around nine million (yes 9,000,000) people are currently paying either too much or too little tax. This equates to around £4bn a year because of two reasons – the incorrect tax codes are being issued by HM Revenue and Customs (HMRC) and because of a poor lack of tax planning. Did you know that one in every three UK taxpayers is entitled to a tax rebate? When was the last time you checked the tax code on your pay or pension slip?
We all have a personal allowance, which is the amount that we can earn before paying any income tax. This is currently set at the first £12,500 – valid until April 5th 2020 but could possibly change. There are exceptions to this amount, for example if you are claiming for expenses such as wearing a uniform or have a company car, then this amount could be considerably lower. If you are the one of the people underpaying and owe tax, you need not worry. It doesn’t all have to be paid back at once. HMRC will agree a payment plan with you or let you pay off smaller amounts through your salary.
HMRC says that one of the reasons this is happening, is due to not being provided the correct information. So, who’s shoulders do this fall on? The employer or employee? You could speak to your employer as they could be missing important information on you, such as your P45 form from a previous employer. Remember that you also need to update HMRC if your circumstances change, such as changing jobs, going self employed or getting a salary increase. If you’re unsure on how these affect your tax code, press the green button for a free consultation with one of our experts.
Always keep records and receipts! It can be tedious task but without hard evidence of your expenses, you are essentially giving your money back to HMRC. How can we make this easier for you? By using our platinum partner companies such as Receipt Bank and Xero, you can photograph your receipts and upload them straight onto the system. The incredible software is able to extract the data from financial paperwork quickly so that you can sit back and relax.
For businesses, there is also a tax-free allowance. This means that you only have to pay tax when your capital gain is above the set annual amount. For citizens, this currently sits at £11,700, and £5,850 for trusts. Similarly, there are other certain circumstances which may make assets exempt – such as residency, for example. Once this has all been determined, you will need to report this information either through a real-time tax service, or in your annual self-assessment tax return. If this all sounds a bit overwhelming, you can trust Nordens to handle both the reporting and payment of capital gains tax, helping you avoid any risk of inaccuracy or accidental over/underpayment- we’re by your side from start to finish! Read about our Capital Gains Tax Services here. Tip – If it makes financial sense to sell some of your investments, then doing so just before the tax year and just after the tax year will reduce your tax bill. Why? Because you get to use two allowances and defer the tax on the second sale until January 2021.
Many people have expressed that they feel a bit lost when checking their pay-slips and don’t know what their next step should be. If you’re concerned that your tax code isn’t correct, get in touch with our team. Click the green button to book a free consultation. Alternatively contact us on enquiries@nordens.co.uk or call on 02085300720
