Breaking out of our fear of taxes, with Carla Hoppe
☎️ Carla Hoppe spent the past 15 years as a corporate lawyer and tax advisor, and is now the founder of Wealthbrite. She is also the voice behind the popular Rethink Tax account on Instagram.
💸 In this episode, we explore why so many of us want to run for the hills when we hear the word ‘taxes’, learn easy tips and tricks that will help you understand taxes better, and understand the ways in which taxes will be changing this year.
💥 Today on The Wallet:
1️⃣ It’s common to feel anxious about tackling your taxes but learning the basics of how it works helps ease some of that stress, so Carla shares what steps you can take to ease the burden of filling out a tax return.
2️⃣ National Insurance (NI) payments are changing in April, and Carla helps us understand what this means for you in a practical sense, and how to plan ahead.
3️⃣ The end of the tax year is approaching, which is the perfect time to address your finances, so Carla highlights what you can think about and do in the run-up.
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You can listen (23 min) and subscribe here:
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1. The psychological block of dealing with taxes
“My advice is that now is the time to take stock, now is the time to understand what money do you have coming in and where are you spending your money?”
When we ask people ‘are you happy to pay tax to fund things like the NHS?’, people usually answer ‘yes’. However, when we dig a bit deeper, the reality is that we always want someone else to do the paying of the taxes — not us.
Tax is seen as a burden — something that is taking away from us. There’s a disconnect in our minds between how much tax we pay, and what we get back. It’s important to have an awareness of what our taxes fund (our every day experiences).
It’s not unusual to feel that filling out a self-assessment tax return is a burden, but the things you can do include going to the government website — it offers a wealth of resources to help you understand the process.
The other thing you can do is talk to someone — reach out to people in your social networks because chances are, they’ve faced the same issues as you and will be willing to help.
Also, don’t underestimate how helpful it can be to call HMRC.
2. Understanding the new tax Changes
April 6 marks the start of the new 2022-23 tax year when most workers start to pay a new tax: the health and social care levy. For one year only, the levy will take the form of a 1.25% point increase in the national insurance that employees, their employers and the self-employed pay.
Due to people’s concerns over the cost of living crisis, he also announced that the income threshold at which you start to pay national insurance will rise to £12,570 from July 6, 2022.
That’s why it’s important to take stock of where you are today. A lot of changes will be coming in that are beyond your control, so doing a personal audit can make all the difference in terms of helping you understand how you can plan for these changes.
3. tips for approaching the end of the tax year
If, once you’ve done your personal audit, you find that you have some cash left over, then it might be worth looking at making the most of your tax allowances. While you don’t have to put the full amount of money into your ISA for the tax year, if you do have some money that you feel you can put away and invest, that might be a good way of spending it.
You also have a £40,000 allowance in terms of amount that you can contribute into your pension. So again, if you have some extra money, and you’re looking for a way to make that money work harder for you, then contributing to your pension might be a good thing to consider. If you aren’t contributing into your workplace pension, you’re leaving free money on the table.
Check what council tax band you’re in, because depending on the band you’re in, you might be eligible for a rebate. It’s also worth checking your national insurance record. If you have any gaps in your National Insurance record, you can actually go back and top up missing years. If you’re in employment, make sure you’re reading your payslip — because you could be under or over paying your tax. That’s why it’s important to know what code you’re on.
RESOURCES:
You can follow and connect with Carla at:
https://www.wealthbrite.co.uk
Instagram: @rethink_tax
Resources mentioned in the episode:
Check your Council Tax band: https://www.gov.uk/council-tax-bands
Check your National Insurance record: https://www.gov.uk/check-national-insurance-record
Claim Child Benefit: https://www.gov.uk/child-benefit
*** Our podcast partners PensionBee are also offering you a £25 pension contribution (£20, plus £5 in tax relief) when you sign up. To claim the offer, follow this link: https://www.pensionbee.com/vestpod. Capital at risk. ***
