Are you on the correct code? Find out which tax code you should be on for the current tax year April 6th, 2020 – April 5th 2021.
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Don’t forget to check if you’re on the correct tax code
Making the most of your UK tax refunds
If you are employed or are the receiver of a pension, you will already have or be issued a 2020/21 PAYE code from HMRC. The code comes via mail, or self-assessment taxpayers can check online. Tax codes tell you or your employer under which criteria to operate and deduct taxes from your wage or pension; hence getting your tax code right is crucial to avoid overpaying on tax and making the most of your UK tax refunds. This article offers you an insight into the type of tax code you should be listed under to make the most of your UK tax return.
The basic personal allowance to qualify for tax-free criteria
The basic personal allowance for the 2019/20 tax year will be GBP 12,500. This means your basic earnings should be over GBP 12,500 before you become eligible for paying tax in the UK.
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Basic UK tax code in general
For most individuals, the basic tax code is 1250L; which is their entitled personal allowance divided by 10. And unless you are not entitled to it, your PAYE code should include the full value of your personal allowance; exemptions are for example if your personal income exceeds GBP 100,000.
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Higher threshold of UK tax from April 2020
With the bar-raised you benefit somewhat, which means you are able to earn up to GBP 50,000 before falling under the 40% band. This allowance is applicable to all your taxable income and not only your earnings through wages.
UK Tax rates for 2020/21 – Check Your Tax Band
- Personal allowance up to GBP 12,500 = 0% tax
- Basic rate GBP 12,501 – 50,000 = 20% tax
- Higher rate GBP 50,001 – 150,000 = 40% tax
- Additional rate GBP 150,000+ = 45% tax
*you must also be aware of the surreptitious increase in effective tax rates that are applicable where the allowance is not valid, and also areas the high-income child benefit fee is applicable.
As you can see it’s imperative you pay tax under the correct UK tax code, or else you end up paying too much and losing or paying too little and getting penalised. Make sense of it all by consulting a UK tax accountant and you will see that the savings and peace of mind you gain well justify the fee; do contact us today for a consultation.