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.

Personal Allowance

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.

Marriage Allowance

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.

To learn more about tax and keep up-to-date with all the latest tax deadlines download our handy 2016-17 tax guide for free.

Jonathan

About the Author

Jon is a highly qualified and experienced Chartered Financial Planner and Certified Financial Planner with over 27 years’ experience. He loves working with clients who are passionate about getting the most out of life and feels his job is to support them living life to the fullest. Read more from Jonathan...
This article is distributed for educational purposes and should not be considered investment advice or an offer of any product for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated.
Dear Dom, Thank you for a very helpful meeting this afternoon. I always find seeing you a valuable reflective space, not least because you are such an excellent listener and so self-evidently a safe pair of hands. CL & MF (Oxford)

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