How changes in tax receipts and National Insurance may affect you
With tax and National Insurance (NI) receipts making headlines, many people are understandably concerned about what this means for their tax obligations.
Recent data from HM Revenue & Customs (HMRC) shows that while total tax receipts are up, National Insurance contributions (NICs) have fallen by over £1 billion compared to last year.
The drop is mainly due to the cut to NI rates that were actioned by the previous Government.
This hole in the national pocket was balanced out by a rise in Income Tax receipts, which has been caused by wage growth being more than double the headline rate of inflation and due to more people being pulled into higher tax brackets.
In August alone, tax receipts were up by £9 billion compared to the same time last year.
Many people wondering what impact these figures will have on their overall tax position.
This increase is largely due to contributing more Income Tax, while NI receipts dropped after the Government reduced the NI rate by 4p earlier this year.
What does this mean for your tax strategy?
If you are feeling concerned about how these tax changes might affect you, you are not alone.
Tax planning, has of course, always been important.
However, the rise in Income Tax receipts and fluctuating NI contributions, means that this planning and staying proactive is more important than ever and can prevent unexpected tax bills.
While the reduction in NI contributions may seem like a bit of relief for individual taxpayers, the rise in PAYE tax receipts indicates that many people are paying more tax due to wage increases.
As salaries climb, more people are being pushed into higher tax brackets, which results in larger tax bills.
This highlights the importance of regularly reviewing your tax strategy to ensure you’re taking full advantage of available reliefs and deductions, particularly in light of changing tax rates and thresholds.
Whether it’s through careful management of allowances or optimising your income, careful tax planning can help you avoid surprises when your next tax bill arrives.
If you are concerned about any element of your personal taxes, contact us today for assistance and advice.
