Good news: Although it’s four days later than last year, Today is Tax Freedom Day! So what is it? It is the day when average Britons stop working for the Chancellor and start working for themselves.
How is it calculated? The answer to this is simple. It’s calculated by comparing general government tax revenue with Net National Income (NNI). The total of all government tax revenue – direct and indirect taxes, local taxes and National Insurance contributions – is calculated as a percentage of NNI at market prices. That percentage is then converted to days of the year, starting from 1st January.
You might think looking at your tax bill is as fun as root canal surgery but it doesn’t have to be. There are lots of ways to further reduce your tax bill but here are just a few.
‘Rent a room scheme’ – a government run scheme whereby homeowners can charge rent of up to £7,500 tax free, within a given tax year. The rent charges have to remain below the £7,500 threshold if the payments received are to be completely non-taxable. The limit has increased this year.
Flexible working arrangements – employees working from home need to consider their tax position if the companies agree to pay for the home telephone bills. Claims can only be made for the cost of business calls and not on the line rental or other fixed charges. Reimbursed costs of private calls will be classed as a taxable benefit.
Self-employed people – working from home could mean missing out on significant tax savings by not claiming your full expenses entitlement. You could be eligible to claim a proportion of household expenses, such as heating, lighting and telephone calls, against your business income.
Unincorporated small business – If you’re an unincorporated small business owner, it may be better for you to incorporate/ become a limited company.
One of our tax experts can give you more information on all the above and other tax issues specific to your individual circumstances. You can find one on our tax page.
To find out more, call us on +44(0)330 024 3200 and speak to one of our personal tax experts.