Higher Rate Taxpayer

kam1000

I am a higher rate taxpayer now and have no idea what this means for my tax situation. can anyone direct me to good sources of advise and/or provide a checklist please?

I have established that I definitely fall in the higher rate band, even after calculating personal allowance, savings etc.

Tozer

Not quite sure what you need to know. Are you on PAYE? If so, it makes little difference - other than paying more tax. However, if you have other earnings (interest, property income, dividends, etc) then you should declare this on a tax return as you will be required to pay extra tax in addition to that deducted at source. On the flip side, if you have a personal pension, you can claim extra tax relief.

kam1000

Thanks Tozer. Yes I am on PAYE.

I do have other income. How do I go about completing a tax return and when.

Yes I contribute to a personal pention, currently through my wageslip. How do I reclaim money from this? Doesnt it happen automatically. I have been paying into it for three years but was not on higher rate before. Can I claim for then as well?

Where can I get comprehensive advise on what I should be doing, how and general tax planning?

Thanks

fengirl_2

Tax relief on your pension contributions will have been given before PAYE is applied, so you automatically get full tax relief that way.
If you have other income, then you will probably need to self assess in order to pay the additonal tax on that income. You need to ring your tax office and make sure you are issued with one after 6 April. It needs to be sent back by 30 Sept if you want HMRC to calculate your tax and by 31 Jan 2009 if you are calculating your own tax.
As to tax planning - do you have your maximum ISA's, can you pay additonal voluntary contributions into your pension, are you claiming all your expenses under PAYE? Without knowing your circumstances its hard to be specific.

Tozer

You can only claim back tax relief in respect of stand-alone personal pensions and AVCs and not in respect of employee schemes (as your contribution is paid before tax anyway).

Just tell the tax office that you want a self-assessment form. Initially, they look very complicated but providing your circumstances are pretty straightforward aren't actually too bad once you get into them. You can also submit the form online. The trickiest thing is getting all statements from Banks and building societies, dividend information, etc.

kam1000

Thanks!
I will I know when I actually became a higherrate tax payer. Will that designation be assigned to me for the whole tax year if I became one at any point during that tax year?

Also, how do you guys know all this? Where can I read up on tax advice for higher rate tax payers.

Tozer

Under PAYE it will all happen automatically when your average earnings hit the appropriate level. If your earnings were to drop again, then the tax will go down. In this way, in theory, you should be all square when you submit your tax return.

Just read into any tax minimisation measures - e.g. ISA allowances, pension contributions, etc.

You soon build up a bit of knowledge about what you can and can't get away with.

mr_fishbulb

Tozer wrote: »

The trickiest thing is getting all statements from Banks and building societies, dividend information, etc.

When you do this, do you have to actually get the interest certificate from the bank(s), or can you just run through your statements, tally up the interest and write the total on the tax return?

jem16

mr_fishbulb wrote: »

When you do this, do you have to actually get the interest certificate from the bank(s), or can you just run through your statements, tally up the interest and write the total on the tax return?

You can but the certificates make it easier.

That said HMRC could ask for proof although I have never been asked so far.

Mikeyorks

You also have to calculate the tax deducted / gross interest if you DIY. Fools a lot of people ... so it's easier to get the Certificates as it's done for you?

LisaContractorUmbrella

kam1000 wrote: »

Thanks!
I will I know when I actually became a higherrate tax payer. Will that designation be assigned to me for the whole tax year if I became one at any point during that tax year?

Also, how do you guys know all this? Where can I read up on tax advice for higher rate tax payers.

The PAYE system works on the assumption that your earnings for one pay period will be the same for the whole financial year and tax is then applied accordingly e.g. if your earnings for month 1 are £5000 the system will assume that your earnings for the year will be £60000 (£5000 x 12) and you will pay income tax accordingly.

HTH