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Income Tax: Changes that may affect how much you pay

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Mmmm tax. We don’t really like the thought of income tax and we would rather not have to pay it, especially when we add up the huge sums that go out of our wage packets each month, or in six-monthly instalments if you are self employed of course.

Keep on top of any changes that may affect your income tax

However sadly the truth is it’s something anyone who is earning income above a certain level has to pay, and it’s something we have to keep on top of. Or we risk fines and worse from the HMRC.

This means that reporting any changes that may affect your income tax are vital, and must be reported as soon as they happen. This is not only because you may not be paying enough tax, but also because in some circumstances you will be paying too much and unless you inform HMRC they won’t know. And by not having the correct calculations you may wait a long time to have them corrected, this could leave you out of pocket.

When to inform HMRC of any changes

So under which circumstances do you need to let HMRC know your circumstances have changed? And how do you inform them of changes?

– I’m getting married (or forming a civil partnership)- Firstly congratulations but it is a fact you need to inform that tax office of because it can affect the tax you pay. IF one partner was born before 6 April 1935 you may also be eligible for the married couple’s allowance. If you are receiving this and then divorce or separate you also need to let HMRC know.

Income tax changes: Getting married

– If one of you dies – If your spouse or civil partner passes away you also need to contact HMRC if either you are claiming married couple’s allowance or either of you claims blind person’s allowance and some or all of this was transferred to the other spouse or civil partner

– Yay! I’ve got a second job – In recessionary times every penny counts and a number of families and individuals look for secondary incomes to boost their family finances but this also needs to be declared because you will need to be paying income tax on this amount.

– I’ve had enough of my boss and am becoming self employed, or I am going back to the safety of contracted employment – Again because of the different rates of income tax, and the differing ways in which they are collected depending on the way someone works, could also affect payments.

– I’ve got some great benefits from the company I work for – Again the tax office needs to know about things such as a company car or medical insurance that you may get through work, as this also affects your taxable income so they need to know when such company benefits start or stop.

– Increases in other income – You are also required to let the HMRC know if other incomes such as savings or rental incomes rise or fall.

– Starting or stopping state benefits or reaching State Pension age – again these will affect what you pay.

How do you report the changes to HMRC?

How to report such changes to your income varies according to a number of factors, including income level, if you pay by PAYE or if you complete a tax return for example. Your best bet is to check out the HMRC website for information on how to report the change.

Avoid any unwanted surprises

Talking to HMRC is the best way to avoid nasty tax surprises and big bills in the long run!

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About Liz Morrell

About Liz Morrell

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