Earn more, tax-free – yes, you can!
Featured Products Promotional FeaturesPosted by: Dental Design 11th July 2021
After a tough year, you may be looking at ways to optimise your business and personal finances. One way is to take advantage of some of the allowances that will enable you to enjoy more of your earnings, tax-free. For dental practice owners and professionals, this is great news after your income likely took a hit in 2020.
Here’s an overview of some which could work for you.
Know your bands, and your allowances
Each year, you’re given an allowance for certain taxes where you only have to pay tax if you exceed that allowance. This counts for various sources of income, and each has its own tax and its own allowance, which can vary depending on the income tax band you fall into.
Your personal allowance is what you can earn without paying tax – this applies whether you are employed, or self-employed. For the 2021/22 tax year, this increased to £12,570, from £12,500. If you live in England, Northern Ireland or Wales, your earnings will fall into these tax bands: 20% basic-rate, (earnings between £12,571 and £50,270); 40% higher-rate, (£50,271-£150,000); 45% additional-rate, (earnings of £150,000+). You’ll start to lose your personal allowance once you earn more than £100,000 – regardless of where you live in the UK. For every £2 you earn over £100,000, you’ll lose £1.
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Dividends and capital gains allowance
The tax-free amount you can earn from dividends in 2021-22 is £2,000, which it’s been for years. You might earn dividends as part of your income if you have invested in company shares, but you’ll only be taxed if you earn more than £2,000 in the same tax year. The rate you’re taxed at depends on your income tax band.
The capital gains allowance refers to the amount of profit you can earn from selling valuable items before having to pay tax on it. It remains at £12,300 for 2021/22, and if you own assets jointly with your spouse, you can pool your allowances. If you exceed the allowance, the amount of tax you’ll pay depends on your income tax band and property is taxed at a higher rate.
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Trading and property allowances
If you earn a small amount from things like selling items on eBay, or making items to sell on Etsy, the trading allowance could be useful. As long as this income remains below £1,000, you won’t need to inform HMRC. You can earn up to £1,000 from your property without having to report it to HMRC too, useful if you rent out your parking space, for example.
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Rent-a-room scheme
The rent-a-room scheme threshold is remaining at £7,500 for 2021-22. This is the amount you can earn tax-free for letting a room in your home. This only applies to the property you live in; earn more than this threshold, you must submit a self-assessment tax return.
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Cut your tax bill with an ISA
The ISA allowance for 2021-22 is remaining at £20,000, which is the total amount you can pay into one or a mix of ISAs. All money held within an ISA remains tax-free, including interest.
These are just a few ideas; to explore other ways to save, why not enlist the services of a specialist dental accountant, like Figurit? With knowledge of the industry, we can help you make the most of your allowances and also support you with other ways to grow your nest egg and your business.
When you can enjoy more of your earnings, it’s like an unexpected pay rise! Take advantage now to reap the benefits.
For more information, please visit https://figurit.com
or call Figurit (formerly known as Lansdell & Rose) on 020 7376 9333.
Author:
Michael Lansdell – Business Director
Michael is a specialist Dental Accountant and Tax Advisor with strong technical and communication skills.
Completing his training with international accounting firm Deloitte he then became a founding Partner at Figurit (formerlly Lansdell & Rose).
Michael combines a strategic approach with high attention to detail and is focused on saving his clients tax over both the short and long term, using robust tax-saving vehicles and tax efficient business structuring.
T: 020 7376 9333 E: info@figurit.com
