How to maximise your income and check you’re claiming the right benefits

Fergus Muirhead shares his advice for maximising your income

Five questions you should ask yourself are:

Is your tax code correct?

Are you paying too much tax?

Read the answers to these questions here.
More advice on making sure you're getting the benefits you may be entitled to if you're on a low income can be found on the websites below:

10 things every taxpayer should know

How much do you really know about the UK tax system? Fergus Muirhead shares the must-know facts
Tax calculator

There’s nothing certain but death and taxes we’re told. And it’s true.

We all have a liability, and some would say a duty, to pay our taxes and to pay them on time. But how much do you really know about tax system here in the UK?

Money Doctor, Fergus Muirhead answers these questions:

What taxes do I have to pay?

Broadly speaking, you will have to pay income tax on any money that you earn and capital gains tax on any gains made when you sell certain goods that have increased in value.

However, most cars and the main residence you live in are exempt from Capital Gains Tax.


What about National Insurance. Is that a tax?

It is really. It used to be the case that National Insurance contributions, which, for most of us, are calculated as a percentage of our income, were ring-fenced to pay for things such as the NHS and road infrastructure. But nowadays it all seems to go into one pot to pay for all of the services we use.


What about when I die?

Your beneficiaries may have to pay Inheritance Tax on the value of your estate when you die.

There are things you can do while you’re still alive to reduce the value of your estate, and so reduce the eventual tax liability, but they are often complicated and expensive and you really need to take specialist advice.


How can I avoid paying tax?

You shouldn’t! We all have a duty and responsibility to pay tax otherwise nothing would work.

Technically, you can reduce the amount you pay in tax and that means arranging your finances in such a way that you pay as little tax as legally possible – keeping shares in an ISA or investing in a pension are just two examples.

Tax evasion, on the other hand, where you don’t tell HMRC about money that you have earned, is illegal.


How do I pay tax?

If you are employed then your income tax is paid “at source”, which means that it’s paid by the time you receive your wages, and you will have no further liability unless you have cash coming from an investment or elsewhere.

If you are self- employed then you will have to pay your tax direct to HMRC through self-assessment.


How much tax will I pay?

From April 6, nothing on the first £11,000 you earn, then 20 per cent on the next £32,000 and 40 per cent up to £150,000. You’ll pay 45 per cent on anything over £150,000.


Is my pension taxed?

Yes, you’re taxed above your Personal Allowance, but you can take part of your pension pot tax-free.


When do I have to pay my taxes?

If you are employed then you will pay it as you are paid each week or month. If you are self-employed, you will pay some tax each January and July.


Can I give money away without it being taxed?

You can give money to charity and your spouse tax-free, and in some cases charities can reclaim tax on money you have already donated.

Find out more about understanding tax on this site here and try our financial education module on tax to help you get to grips with it all.
Subscribe to RSS - tax