The new financial year is in full swing, and it’s when the new rates and regulations kick in. Your personal allowance has changed along with other vital thresholds that take effect when it comes to completing your tax return.

Personal Allowance

The new year brings the new personal allowance at £12,500 for the year. So, what is your personal allowance? Personal allowance is the amount of income in which you do not have to pay tax on. You will pay tax on anything over the £12,500, the table below will display what percentage of tax you pay in each band.

You do not get a personal allowance on taxable income over £125,000. Any income above this threshold and tax will be due on all amounts to the respective band.

Dividend Allowance

As well as the personal allowance, the dividend rate has also changed. Just like a personal allowance, you also have a dividend allowance. Dividends that fall in within your personal allowance do not count towards your dividend allowance.

The tax you pay depends on which Income Tax band you’re in.

Example

Say you were to get £4,000 in dividends in the 2019 to 2020 tax year. The dividend allowance is £2,000, so this means you pay tax on £2,000 (£4,000 minus £2,000) of your dividends. Your other taxable income is £30,000. Add this to your dividends of £4,000 and your total taxable income is £34,000. You pay a rate of 7.5% on £2,000 of dividends because your total taxable income is within the basic tax band.

National Minimum Wage

If you employ staff, then you are probably aware that the National Minimum Wage rate has also changed. It is a legal requirement to pay the NMW as an employer.

For all the rates mentioned, they usually change every year, typically in April. You must be aware of these rates to make the most out of completing your tax return and to fulfil your legal obligation. There are many other allowances and rates, but the ones mentioned are the usual ones that affect everyone. If you are worried about whether you are in the right tax band or not sure if you’ve used up all of your allowance, please visit our website on www.crossaccountingservice.co.uk or call us on 02920 653 995 where a member of staff can assist. We are always happy to help.

Welcome to our latest blog. Summer has been in full swing here and we have now had great weather for several weeks. There are lots of activities that happen during the summer months and its always great to support your local businesses.

This time of year, we are noticing a larger number of people investing towards a property. This may be a change to the current house or a house to rent. Whatever the reason may be, you might need help financing in the way of a mortgage.

So, what is a mortgage? A mortgage is a loan taken out to buy a property. The loan is secured against the property until it is fully paid off. If you can’t keep up with repayments, the mortgage provider can repossess the house so its extremely vital to crunch the numbers and know if a mortgage is right for you.

Many factors are taken in to consideration to approve a mortgage. Proving your income is usually the deciding factor as the lender needs to know you can repay the mortgage. Here at Cross Accounting we provide our clients with their SA302 to prove their earnings. You can obtain the last three years proof of earnings if you file for self-assessment through your HMRC’s online account, with a tax year overview.   Mortgage companies like to see you are on time when paying your taxes.

Many banks have an online calculator to estimate the interest payment you will need to make, it does help you budget for the new property.

We are authorised and can help obtain a mortgage, please do get in touch to discuss your situation and see how we can help you. A house is one of the largest single purchase you’ll likely make so you want to take care and get it right from the beginning.