Tax can be a source of anxiety for most business owners who prefer not to think to much about it until those dreaded deadlines come into view. This anxiety is not helped by myths and false beliefs about tax which can end up costing your business more than is necessary. With this in mind here is the most common mistakes made on tax.
One of the most common false beliefs about tax relates to tax bands. People mistakenly believe that if they fall into a higher tax band, they will get hit harder for tax than people who fall just below it. This is not helped by perception that tax calculations are complicated when they are not in this regard.
If we consider the current banding in 2018 below:
£11,500 — untaxed
£11,851 to £46,350 — 20%
£46,351 to £150,000 — 40%
£150,000 or over — 45%
Then we can see that people will assume that staying below these thresholds will make them better off. The reality is that if you earn say £1,000 over any of these thresholds you will be worse off. This isn’t the case however as you will only be paying tax on the extra amount over and above the threshold rather than paying it on the full amount.