Check your tax - you may be due a rebate

With additional tax changes introduced in April, the number of people paying the wrong tax is likely to increase this year warns Moore Blatch Solicitors.

Last year, approximately six million people in the UK paid the wrong amount of tax.

Moore Blatch tax specialist, Peter Hendy comments: “This is not an exaggerated figure; many people are affected by underpayments and overpayments of tax each year. More worryingly, a lot of people are also able to claim a tax refund, but will lose out because they are unaware of the entitlement.”

In the past two years, about £2bn was underpaid via the Pay As You Earn (PAYE) system, with about 1.4 million people owing an average of £1,500 each.

Conversely, £1.8bn has also been overpaid with some 4.3 million people getting a rebate because they have paid too much tax.

But it is not just employees that are affected or need tax advice, about nine million higher-rate taxpayers and those with untaxed income, such as landlords, freelancers and sole traders are required to submit a tax return each year.

Peter continues: “Although this is an annual requirement, many people fail to submit tax returns on time due to other priorities and can incur unnecessary fines.”

Taxpayers are believed to have paid fines in excess of £422m this year - £12m more than in 2010, with the figure predicted to rise even further in the future as more people are falling into the self-assessment net.

Peter details below some of the recent tax changes introduced and highlights those that are likely to be affected:

• Some 500,000 people in the UK will no longer pay income tax.
• The threshold for the higher-rate 40% income tax rate is now £35,001 of taxable income, compared with £37,401 last financial year. 
• Wealthy households have been particularly affected by this April’s tax changes due to the restrictions on the amount that can be contributed to a private pension.
  

This group is also affected by the 50% income tax rate on earnings above £150,000 and withdrawal of the income tax personal allowance above £100,000 - both of which were introduced in April 2010. For every £2 earned above £100,000, £1 of the personal allowance is lost.

The above changes mean that between £100,000 and £114,950 earnings will now attract a marginal tax rate of 60%.

With over 35 years tax experience, Peter specialises in the preparation and completion of self assessment tax returns and can also advise on Capital Gains Tax.

Working closely with Moore Blatch’s private client department, Peter regularly advises clients on their tax liabilities, helping to ensure tax issues are managed in the most cost-efficient manner.

“Ensuring that your tax position is reviewed on an annual basis can prevent any unwanted surprises and allow individuals to exercise better control of their financial position,” concludes Peter.

With so many groups affected by the recent tax changes, Moore Blatch is offering to review an individual’s tax position for a fixed fee of £150 plus VAT. Providing a comprehensive insight into your tax liability and potential savings, the one off fee is proving popular with clients determined to proactively manage their finances.