Skip to main content

Income Tax for Individuals - 5 Things You Need to Know

This week’s blog is about income tax for individuals. Now, the realm of income tax is huge so I have picked out the top 5 areas I have been contacted about recently.

But if you have an issue in mind that is not covered here, just get in touch and we would be happy to answer your questions. 


So what is income tax?

Income tax applies to individuals on certain types of income they receive and that could be from a number of sources such as employment, renting a property, selling an assets, income on savings and receiving dividends from companies. 

So in the UK we have about 30m employed persons and nearly 6m of SME (small medium enterprises). These small businesses make up 99% of the business population and nearly 17m out of the total 30m employed persons in the UK are employed by those businesses.

1. Employees 

Employees care about the tax they pay so they will be concerned about having the right tax codes, so that they are taxed correctly. That they are not overpaying or underpaying tax. No one wants to receive a bill right? A rebate is always nice though! 

Thankfully, online payroll software companies such as Sage, Iris and Quickbooks are continually updated in the background to ensure tax rates, bands, codes etc are up to date, so this means 99.9% of payroll processing is correct. The 0.1% of error will always be a result of human error and human error is simply putting in the wrong data, not updating an employee’s record with a tax code notice etc. So when it comes to changes, HMRC will always inform a business through issuing tax code notices, notices to correct a national insurance number etc. When HMRC sends any notice, it is really important for the employer to action it without delay. 

At the end of each tax year, HMRC will notify any individual if there are discrepancies such as over or underpayments of tax. 

However, if at anytime, you feel your tax code is wrong or that you may be overpaying tax, it is always advisable to contact HMRC but we also urge individuals to set up a personal tax account via HMRC’s website https://www.gov.uk/personal-tax-account

By setting up your tax account, you will see what payroll has been processed for you, what your current tax code is and you can update your details such as home address. You can also check how many years you have paid in (and have left) towards your state pension. 

So if you haven’t set up your personal tax account, add it to your To Do List!

2. Personal Allowance

Every person in the UK receives a personal tax free allowance of £12,570 (current tax year). The only time this tax free allowance is reduced or removed is if you earn more than £100,000 in a tax year. For those earning more than £100,000, the personal allowance is gradually withdrawn at a rate of £1 of allowance lost for every £2 over £100,000 until it is completely removed. 

3. Marriage Allowance

If you are married and your spouse does not work or has a lower income (below £12570) then your spouse can apply to transfer 10% of their personal allowance to you. In this current tax year, this has increased by £10 to £1,260. Also, great news for those who meet the criteria and have done for previous tax years, you can apply the transfer against earlier years so the partner with the higher income, could receive £250 per tax year for missed earlier tax years. If you need any help or have any questions, get in touch!

4. Dividend Income

For all those holding shares in UK companies and receiving dividends, you can receive up to £2000 of dividend income completely tax free (on top of your personal allowance). The tax rates beyond £2000 of income, are still attractive, at 7.5% for basic rate taxpayers and 32.5% for higher rate taxpayers. This is why we always advise those individuals running their own company, to be employed and receive dividends and we can help reaching that optimal balance. 

5. High Income Child Benefit Charge

For higher rate taxpayers (those earning more than £50,000 in a year), who are themselves or their partners in receipt of child benefit, you need to be aware of the high income child benefit charge. This was introduced on 7 January 2013 and means that a charge will be levied on the partner with the higher income regardless who receives the child benefit. The charge is calculated as 1% of the amount of child benefit received for every £100 of income over £50,000.


Do you need help?

So if you think you have overpaid tax or you have any concerns relating to income tax, please get in touch with us. We offer free consultations.

📞 01639 490 170   ðŸ“ž  0208 168 0507 📞 07465 816 801

📧 hello@rgsaccountants.co.uk
🌎 www.rgsaccountants.co.uk 
📅 Book a Call / Meeting 
https://calendly.com/rgsbooknow/free?month

We hope that you have found this blog useful and thank you for reading it 🙂

If you want to access more content:  Follow Us

Facebook & Instagram @rgsaccountants 

Spotify https://sptfy.com/6gEI


#rgsaccountants #soletraders #selfassessment #incometax #personal allowance #marriageallowance #dividendincome #highincomechildbenefitcharge #employmenttax #taxonemployees #employees 

Labels:

Comments

Post a Comment

Popular posts from this blog

Covid-19: Claiming 80% from the Government

For most of us, we are experiencing the most surreal and financially crippling time of our lives. Businesses are facing extinction; individuals unable to work with their income stopping overnight. We never saw it coming or at least, not like this. It’s truly life changing. There is always a light at the end of the tunnel though. Our light, is the Government creating a huge support package to ease our way out and ensuring that the aftermath is not an economic crash. This support package initially focused on businesses operating as limited companies, but has now been updated to include sole traders or otherwise known as individuals working for themselves, of which there are more than 3m, making up 60% of all businesses in the UK. What’s the package? If you are employed and unable to work, you can receive 80% of your gross pay; if you are self employed, you can receive 80% of your trading profits (over the last three years to 5 April 2019). How can you get it? The systems are cu...
1 comment
Read more

Covid-19: Preparing for Life After Lockdown

Covid-19 has turned our lives upside down. It is fortunate for those people and businesses which have still been able to work but it is very worrying for those that have come to a stand still. We are living in uncertain times and as lockdown is extended, the reality for many businesses not being able to trade or even survive, takes form. It’s time to take back control. We have to change I am sure most of you jumped at doing all those things you have put off such as cleaning out the kitchen cupboards or painting your front room.  We find ourselves with too much time. So let’s use this time to create the future we want.  Ask yourself, “ Am I Working to Live or Living to Work?” Let’s change - do what you want to do and Work to Live! Lockdown Tips  Make a personal list of all the things you want to do aka a bucket list. Remember, be realistic! If you run a business, carry out a mini assessment. How has your business been performing? Is it the way you tho...
Post a Comment
Read more

Starting A Holiday Let Business

So today I’m going to tell you about starting a holiday let business so if you have a property and you have been thinking about making an income from it, this blog will tell you all you need to know. In this blog, I will walk you through getting your property set up to be a holiday let, give you my tips on running a holiday let and also tell you what you need to do from an accounting perspective when running a business. By the end of this blog, you will be on course to making money and running a very profitable holiday let business . I am sure you are wondering, why are we talking about holiday lets and why we are experts in this area of business? Well, not only do we have a lot of clients who are start up & established holiday let businesses, we have also helped a lot of clients to make the transition from a residential let to a holiday let. And on a personal note, I have been running a successful holiday let business since 2017. I purchased the holiday let ...
Post a Comment
Read more