Personal Tax Advice with Our 2016/17 Tax Guide
Personal Tax Advice
As the end of the year draws closer, the thoughts of many business owners and freelancers turns to tax. And for many of them, it’s a burden they could do without.
Nobody said tax was an easy subject to get a handle on and you may find evaluating tax liabilities can take unnecessary hours out of the day. However, here at Expert Wealth Management, it’s just what we do.
We understand the tax system as well as anyone, and we’re here to guide you through the complexities, with a trained eye for all the pitfalls that can catch out the unwary. So in a nutshell, what do you need to know? Here are a few things to think about.
You’ll no doubt have heard about the Personal Allowance, and Marriage Allowance in the tax context, but what are they?
Everyone gets a Personal Allowance, whether you’re a student, an employee, business owner or pensioner. This is the amount of money you’re allowed to earn each year, before the taxman takes his share. During the 2016–17 tax year this figure was set at £11,000, so if you earn less than that, you won’t need to pay any income tax. Next year the figure will rise to £11,500. It can go up and down to reflect economic realities.
The marriage allowance allows you to transfer part of your tax allowance to your partner if one of you earns less than the personal allowance rate, which can save a couple up to £220 a year in tax. The condition is that you must be married or in a civil partnership to qualify.
There was also a time when there was an age-related allowance but this has since gone, replaced by a rising personal allowance.
Where does my tax go?
Contrary to common belief, it doesn’t vanish into the chancellor’s back pocket never to be seen again. It’s collected by HMRC on the behalf of the government, from where it’s used to invest in a variety of public services such as the NHS, education, defence and infrastructure, so it benefits us all in some way or other.
Income tax is set in different bands according to what you earn. This is designed to make the system more equitable so that those with the broadest shoulders lift the heaviest burden.
The basic rate of tax is for those earning less than £32,000 a year and is set at 20%, the higher rate of 40% is for those earning between £32,001 and £150,000, whilst the additional rate of 45% is paid by those earning more than that. The good news though, is that the higher rate threshold is set to rise again, and it’ll kick in at £45,000 from 2017.
Does National Insurance pay for the NHS?
Well, yes and no. Essentially it all goes into the same pot collected by HMRC but the National Insurance (NI) contributions you make during your working life are factored in to your entitlements, when claiming certain state benefits. Specifically, NI money is usually targeted at the NHS and social security, including sickness benefits and pensions, so it does remain true to its original purpose.
You start paying NI at the rate of 12% once you’re earning more than £155 a week, but if you earn more than £827 a week it falls to 2% on every pound beyond that.
How Expert Wealth Management can help
Those are a few of the basics points about tax, although there is a lot more for people to understand when filling in their self-assessment forms. When dealing with your own tax liabilities, there’s so much to consider about your earnings, property and investments, which can cause more confusion.