Keeping your earnings in sync with increases in prices is becoming progressively difficult. Most individuals – whether employed or self-employed – would find it unrealistic to secure pay rises (if employed) or price increases (if in business) unless the demand for their goods or services was high.
If most taxpayers cannot match price increases by keeping earnings in sync with these increases, then their purchasing power will gradually reduce.
This autumn, cost pressures are likely to continue, particularly utility costs. This will force many of us to re-examine our budgets and try to figure out how to balance our books, without meeting excess expenditure by maxing-out credit cards or entering into expensive loans.
One solution may be to investigate creating additional income streams. For example:
- Turn a hobby into a part-time business
- Rent out your driveway as a day-time parking area
- Rent a spare room in your house
There are tax concessions that make these activities tax-free, including:
- Trading Allowance which is a tax exemption of up to £1000 a year for individuals with trading income from self- employment, casual services or hiring personal equipment.
- Property Allowance which is a tax exemption of up to £1000 a year for individuals with income from land or property.
It is important to note that the income for either or both of the mentioned tax exemptions should be below £1000. While there is no requirement to include this on a tax return, you should retain records of this income so, if asked, you are able to demonstrate ‘full relief’.
You could also search for ideas and assistance online via www.gov.uk.
To find out how you can save on paying income tax on additional income, please contact your local Moore advisor.
For further help or advice, visit www.moore.co.uk