Change in the Income tax Additional Rate threshold and how can I reduce my taxes

According to the policy paper published by HMRC there are following changes in the income tax additional rate from 6 April 2023:

If you are in one of the following in category you will be affected by the change:

Will you be paying extra taxes as a result of the increase in the threshold?

HMRC has estimated that around £232 000 of the income tax payers will pay the additional rate of tax.

If you want to know how much tax you will pay on your income use Taxaccolega payslip calculator and you will get the results immediately and you will know how much tax and national insurance you will pay.

Income is paid on all kinds of earnings. If you are employed by an employer or you are self employed you should pay income tax .

What can I do to minimize my taxes if my total income is falling in the additional rate tax band.

Because of the changes expected in the higher and the additional rate band a lot of people currently paying tax at 40% will start to pay tax at 45%. This will affect their net pay.

If you are self employed you can be creative with the way you get your income, however if you are employed and getting a fixed salary from your employer you won’t have much choice but to lose some extra money in paying taxes. For information on calculating your take home pay and taxable income, get in touch with us today!

If you are running your own business and getting your income as salary you can employ your partner as well.If your partner has some unused personal allowance you can make use of their allowance this can lower your taxable income and therefore your income tax.

Although different tax rates apply to your dividend income, the dividend income is added to your total income and it might raise the tax band your income falls in pushing you to the higher or the additional rate band .Each year you get a dividend allowance of £2000 this means you only pay tax on the income above this amount. Can you carry forward the allowance?

You don’t have to pay tax on the dividend income from ISA. To reduce your overall taxes if you want to have some investments in the form of shares you can invest in ISA.

If you are a landlord and you have rental income you should make sure that you claim all the allowable expenses which can lower your taxable income.

You might also want to consider transferring it in the name of your spouse if they have a lower or no other income . If they have no other income you can utilize their personal allowance and if they have a lower income you can pay tax on the lower tax rates.

You might also consider transferring it to a company . If you want more information contact Taxaccolega and our team of accountants in london will be happy to help you.