When it comes to taxes in the UK, there are a lot of things which are commonly believed by the public that are actually not true at all. These common misconceptions have been passed along for many years and can cause a lot of confusion when tax time comes around. This is why it is so important to have a qualified accountant on your side so that you can make the best choices when it comes to your taxes.
Here are a few of the common myths and misconceptions about taxes in the UK:
You Will Pay So Much Tax on a Second Job It is Not Worth Doing
Many people believe that if they take up a second job, their earnings will be so heavily taxed that the job itself won’t even be worth it. Of course, this is a bit of a misconception and an exaggeration. The truth is that your second job will fall under the tax code BR and you will pay 20% on all of your earnings. The reason for this is because all of your personal allowance will be allocated to your first job.
So don’t let this myth stop you from taking up a side job if you really want to. Essentially, it doesn’t matter where you put in the extra hours because you will pay the same amount of tax on your second job or whatever you earn over your personal allowance at your first time.
Of course, if your second job pays more than your first job, you might want to contact your accountant and ask them if you should switch the allowance over to your higher paying job. Sometimes this can mean that you will end up not paying as much tax overall.
There Are Ways to Pay No Tax if You Set Up a Limited Company
This is a myth that sounds too good to be true. Wouldn’t everyone love to set up a company and not have to worry about paying tax? Of course, it is not true. If this were the case, everyone would take advantage of such a loophole.
The truth is that in this situation, when you set up a limited company, you will have no additional income tax to be paid on your dividends. Of course, the dividends will have been paid to the shareholder after the Corporation tax has been deducted, so this means that the tax actually has been paid by the company.
If you want to find out more about how to manage your taxes when you are setting up a company, you should speak to your accountant for personally tailored advice.
HMRC Always Get It Right
Don’t assume that HM Revenue and Customs always have their accounts right, as sometimes they can send out incorrect bills or make wrong calculations. Just like anyone else, they have been known to make mistakes. After all, the people who work there are only human!
If you receive a bill that seems a lot higher than you were expecting, it is worth checking to make sure that there hasn’t been an error somewhere. You can ask your accountant to double check and verify the calculations. You just might find that HMRC have made a mistake and you owe a lot less.
These are just a few of the common misconceptions that many people believe about the tax laws within the UK. If you are not too sure about your tax situation or you have questions about what is fact and what is fiction, an experienced accountant will be able to help you make the right decisions.
Bill Jobs is a freelance writer and blogger. He frequently writes about financial topics, such as taxes, budgets, savings and chartered accountants. Loughton is where he is based.
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