The amount of tax your business has to pay will change year on year depending on the tax band you fall into and your Personal Allowance. This post will tell you everything you need to know so you can plan accordingly.

Everything you need to know about personal tax allowance:

What is Personal Tax Allowance?

Personal Allowance refers to the amount the government allows you to earn before you have to pay tax. When you earn more than your allowance within a tax year you will have to pay a yearly tax to HMRC and the amount required will depend on how much you’re earning.

We’ll discuss this in more detail later.

What will the Personal Tax Allowance be for 2021 to 2022?

Everyone has a tax-free Personal Allowance of £12,570 as standard unless you earn more than £100,000 in a tax year; in that case, your Personal Allowance threshold will be less.

You can claim a higher allowance through Marriage Allowance or what the government refers to as Blind Person’s Allowance.

The marriage allowance allows you to transfer £1,260 to your husband, wife or civil partner if your regular income is below the tax free allowance mentioned above and can increase your partner’s tax allowance to £13,830.

Everything you need to know about income tax:

What is income tax?

HMRC requires you to pay tax on the money you earn once you’ve exceeded your Personal Allowance threshold. However, not all income is taxable:

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What are the UK tax brackets for 2021-22?

Once you exceed your Personal Allowance, the percentage of tax you need to pay is separated into bands. Here’s a breakdown of the brackets:

Bear in mind that if your taxable income exceeds £125,140, you are no longer allocated a Personal Allowance.

Everything you need to know about income tax allowance relief:

What is income tax relief?

If you’re:

• Self-employed, a sole trader or part of a partnership and:
• Have spent money on business expenses,
• Claimed tax back or
• If money is repaid in some other way (such as through a pension plan or charity donation)

You might be eligible to pay less tax. This is referred to as income tax relief. Some forms of relief are automatically attributed, whereas others must be applied for.

Your employees can also claim tax relief if they spend their own money on business-related expenses such as travel.

How to claim the most income tax relief

There are many ways businesses can legally claim income tax relief; some are commonly known, whereas others aren’t. One of the simplest ways to harness these considerable savings is to speak to a tax consultant. Your consultant will stay up-to-date with tax relief opportunities and recommend strategies you can implement to make as many savings as possible.

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