subject: You Might Pay More Than You Bargained For This Tax Year [print this page] This tax year 2009/10, people are going to be getting a shock of their life when they realise how much they will be paying in taxes. The tax Policy is undergoing a rigorous change, some changes have already taken affect and the next lot of changes will be taking effect as of April 2011. Needless to say that as taxpayers, we are going to be facing the biggest changes this year. Therefore, it has become even more important for us to track how much we are earning and how much tax we are paying each year.
The major change in the tax system was seen back in 2005 when a new body, HM Revenue and Customs (HMRC) was formed. The HMRC was formed as part of the extensive efforts to modernise the tax system and hopefully make it easier to administer tax calculations as well as to provide more support to those small to large businesses that were actually feeling the pinch as a result of the recession. However, although the tax system was helping businesses in a recession, it was tax payers that actually lost out significantly.
Honesty is the best policy as they say, another reason for the changes in the tax system, to help promote honest and encourage tax payers to be as accurate as possible on their return figures so that an extremely accurate tax figure can be calculated. If you are not honest, and you get caught out by the tax company then you could be in for the biggest shock of your life, facing a penalty charge of up 30%, on the other hand, if you own up, you can potentially have the penalty charge waived as well as get tax discounts in the future.
Personal Tax is something else that we will touch upon. There are significant savings that can be made with this. Keep tabs on the personal allowance, as that may change each year, and make sure that you are utilising the entire amount each year. As a tax credit earner, you are not able to use that to cover your personal allowance; on the other hand, you can transfer the income from a higher rate tax payer (who will get an extra 25% on it) to a basic rate payer.
A personal allowance for people above the age of 65 is a completely different story. They have a higher personal allowance but only to earnings of up to 22,900, anything between 22,900 and 28,930 will be a lot higher. However, as a tax payer who is entitles to n increased personal allowance, the individual can reduce their income so it fits within the right band, making them eligible for the increased personal allowance by contributing money to a charity or by making contributions for a pension plan.
As you can see, there are several ways to make sure you are making savings in tax by monitoring the payments extremely closely with the help of your tax advisers.
by: James Matterson.
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