Tax is a word we don’t enjoy hearing. When we think of tax we think mostly about the government taking money from us and maybe even those fictional villains such as the Sheriff of Nottingham from the Robin Hood tales. Tax is not a word to be scared or confused by thought and it simply refers to any money which we as working folk pay to the government to fund public services such as medicine, the police, and schools.
There are ways to make tax a lot easier to understand and manage such as digital vat software and tax breaks, but today we are going to share some facts to help you understand it a little better.
Not everyone has to pay
It’s not like a magical switch flips when you get a job and you suddenly have to pay tax for the rest of time… in fact, not everyone needs to pay. The reason for this is that there is an income cap which states that anyone earning less than this will not have to pay as they cannot afford to. It is something which can be helpful when you are younger but will change as soon as you reach the threshold.
Not all income is taxed
Taxable and non-taxable income are two different things, and it means that you don’t have to pay tax on all of the money you earn every year. When you have things such as student finances, bursaries and disability allowance you will not be taxed on this as it is often given by the government to those who need it.
You can reclaim
Tax might seem like a big scary monster but it is a fair one. If there is a year where you believe you have spent too much on your tax or your national insurance, you will be able to claim back the difference. The HMRC will be able to check this easily for you and reimburse you for anything you have overpaid.
Self employed can save
When you are working for yourself, tax can be a bit more daunting because your employer won’t input tax data for you and you will have to do it yourself. Recording your own tax will involve a self assessment and this can be a long form to fill in. However if you work from home, you can stand to save money on tax. If you use one of the rooms in your house for your business, you can claim back your electricity or gas for this room, for the number of days you spend here a month.
It means you can claim back a few hundred pounds right away. This can be something which is super useful for people who work for themselves and it will make life a lot easier for you going forward too.
Tax shouldn’t be something to be daunted by, it is a simple payment we make to help fund public services. Hopefully after today you know a but more about this buzzword and how it is used every day.