Six years on from the creation of the Office of Tax Simplification and we have a tax system which even HMRC struggle with. In recent guidance on the subject of the way the personal allowance, the dividend nil rate band and the basic rate band, HMRC produced an example which, if followed, would result in someone with an income of £45,000 overpaying tax by £375. Not a fortune but not a sum anyone would like to throw away!
We won’t bore you with the detailed calculations but it is worth remembering that different sorts of income can be taxed at different rates of income tax. Someone with a £40,000 pension and no other income will pay tax of £5,800; if the income is all dividends the tax bill will be £1,800.
That’s probably enough numbers! Calculating a tax bill, even for a modest income, can be complicated – if you think you need help seek out a qualified accountant.
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