From 5th April 2011, approximately 750,000 taxpayers will become liable to tax at the higher rate of 40 percent, as a result of changes made by the government. The amount of money that a taxpayer can earn before having to pay the higher rate tax has been lowered to £35,001 from the previous figure of £37,400. According to the Institute for Fiscal Studies, high earners may also be affected by other moves such as the limit on the annual amount which can be paid into a pension tax free.
At the other end of the scale, approximately half a million people will not have to pay tax at all, as the yearly amount a person can earn tax free will be raised to £7,475, helping to lift people out of poverty. However, National Insurance is set to rise from 11 to 12 percent, which will claw back some of the lost revenue for the government. Higher rate taxpayers will be hit with higher National Insurance Contributions of two percent on earnings over £42,484, rather than just one percent.
Many sole traders and small businesses will be affected by the latest changes in taxation in the year 2011-12, perhaps seeing a reduction in income. A low cost accountants will provide accurate information of the relevant increases in taxation, and whether they apply to you. It is possible to maximise income with the outsourcing of your accounts to a reputable accountant firm, filing tax returns and accounts in a timely manner and reducing expenditure.
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