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Are You Paying Too Much Income Tax?

Are You Paying Too Much Income Tax?
Thursday, July 26, 2018

On self-assessment day, it feels to many business owners like the taxman is taking far more than they should for what they get back from the government. However, for many business owners and employees alike, you may find that you are actually parting with more of your money than you need to be.

In this article, the Panthera team will explain how much tax you should be paying, how the amount you earn affects your Personal Allowance, and what to do if HMRC owe you money.

A brief recap of the income tax bands

Before we get started on what to do if you discover that you have paid too much tax, here is a quick summary of the income tax brackets for the 2018/29 tax year:

Band

Taxable income

Tax rate

Personal Allowance

Up to £11,850

0%

Basic rate

£11,851 to £46,350

20%

Higher rate

£46,351 to £150,000

40%

Additional rate

over £150,000

45%

It is always helpful to keep these rates in the back of your mind, especially if you are close to falling into a higher tax bracket. There are many ways that you can structure your financial affairs to reduce the amount of tax you have to pay overall – ask us for help on this especially if you’re the director and shareholder in a limited company.

When your income is over £100,000

You do not get a personal allowance if your income exceeds £123,700. This is because, for every £2 that you earn over £100,000, your personal allowance is reduced by £1.

This actually increases the amount of tax you will need to pay between the amounts of £100,000 and £123,700. So, you will start by paying the higher rate amount of 40%, but the £11,850 you were previously entitled to (your personal allowance) is now taxed at the basic rate of 20%. This creates what is essentially an invisible tax bracket between £100,000 and £123,700 where you are taxed at 60%.

This catches many people out especially if you are drawing down from multiple streams of income. For example, if you earn £80,000 and you opt to take a drawdown from your pension (after the tax-free initial 25% of your pension pot) of £50,000, this will breach the £100,000 threshold.

What to do if you have paid too much or too little tax

If you haven’t paid enough tax, HMRC will most certainly let you know about it. However, it is best to make sure that you don’t because they will likely add on a fine or interest onto any amount that you owe them, depending on how much it is and why you ended up owing it.

If you have paid too much tax, then they usually contact you and reimburse you. However, this isn’t always the case. The best way to make sure that you are giving the taxman the bare minimum that you have to is by having an accountant to help you through the process.

If you would like to gain a further insight into how much income tax you are likely to have to pay this year, click here. This is the government’s online calculator which helps you get a better idea of how much you owe.

We can help

If you’d like advice on whether or not you are paying the right amount of tax, get in touch with our team. We’ll discuss with you the ways that you can reduce your tax bill meaning they you get to keep more of what you’ve earned. Call us today on 01235 768 561 or drop us an email to enquiries@pantheraaccounting.com – we’ll be back in touch with you shortly.

What our clients say

For us, there is nothing better than a happy customer. Here are just a few that let us know how much we mean to them.

Pete Dungey

Simple, efficient and most importantly, hassle-free.

We found Panthera via our search for a Xero expert. We knew the software we wanted to use, and needed a forward-thinking accountancy partner who could get us up and running, and teach us the ropes moving forward. Tory and her team have always been on hand to answer our questions, and help us to grow as a business, particularly during periods of big change, such as becoming VAT registered. They are always on hand to alleviate any concerns and help to keep our records in order, which makes our year-end accounts an absolute breeze! Being based in Bristol, our relationship is entirely email based, alongside one consolidation meeting at year end - this keeps things simple, efficient and most importantly, hassle-free.

Pete Dungey Kaleido Grafik Limited
Anita van Eijndhoven

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The support and service we receive from Panthera Accounting is very good. Everything from regular meetings, a prompt e mail response and the transition of our Xero software (which we find very pro active indeed) has and is all remarkably efficient. We find Panthera talk our language and make any process as painless and easy as possible.

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Ash & Tim Lane

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We got in touch with Panthera Accounting by way of a recommendation; we haven't looked anywhere else since. They are an extremely professional yet relaxed group of people. We were slightly daunted by the idea of accountants but Panthera brushed aside y the stereotypes. They are very understanding when answering any questions we may have. They are completely efficient, offer sound business advice, and are fantastically priced. We will continue to recommend them.

Ash & Tim Lane Starveacre Fencing
Jayne Johnson

An Asset to my Business!

The whole team at Panthera are great! Working with them has been a huge support to my growing business. They help me to understand the numbers I need to know. They give me technology solutions like Xero so that I can process things quickly and have access to my own figures. They are quick to reply, highly knowledgeable, nothing is too much trouble and as well as making sure that everything is compliant and on time, they are enthusiastic, professional and fun to work with.

Jayne Johnson Better People
John Baker

Absolute joy - they provide a first class service on every level

Working with Tory and the team at Panthera is an absolute joy - they provide a first class service on every level; from simple Xero issues through to more complicated tax enquiries, they’re always on-hand to help me get it right. I’m certainly not their biggest customer, but I’m always made to feel like their most important one.

John Baker BKR Solutions
John Castle

Professional and Friendly

I would like to say that Panthera Accounting have helped me with my business accounts for more than 4 years now. They have consistently offered an excellent competitively priced service that works both professionally and in such a friendly way that I would highly recommend them to everyone considering using their services.

John Castle Ilexanna Limited & Birch Castle Homes Limited
Jonathan Morrison

They are always there to answer queries and sort out issues

I had been with Mr Dunn for 20 years when upon his death Panthera took over the business. They now play a bigger part in the running of my business, they do all the stuff that has to be done but I don't like doing ie book keeping, VAT, wages, and returns. They are always there to answer queries and sort out issues and make sure all Tax deadlines are met. Their costs are fair, service is great and I have and would highly recommend them.

Jonathan Morrison Wallingford Builders
Pippa Scott

Professional, friendly and personal service.

Panthera Accounting have gone above and beyond the call of duty to guide and support our Company. They offer a professional, friendly and personal service that can take the stressful and sometimes frightening feelings out of running a business. They have guided us through the working of Xero and have offered “teaching sessions” on the day to day running of the accountancy package. Our only regret is that we didn’t join their team earlier.

Pippa Scott Scott's Commercial Services Limited
Sara Southey

Panthera puts the personal back in to accountancy!

Tory and her team have provided a friendly, approachable and helpful service from the start. They have delivered a quality service, above and beyond anything I could have expected. Panthera, with the help of the Xero package, have taken the stress, strain and confusion out of managing my company and personal accounts. I look forward to working with them for many years to come.

Sara Southey Bluestones Garden Design
Tracey Miller

Panthera are fantastic.

Panthera are fantastic. Always professional, going the extra mile for their clients and delivering superb service. I recommend them all the time to my clients.

Tracey Miller Bigger, Brighter, Bolder BBB

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