Guest legal blog post outlining some legal tips for managing personal finances.
Some people think that personal finances are just that; ‘personal’. However, the government needs to know about any money that you make during the year whether that be through a freelancing role, the sale of a house or perhaps even just selling some bits and pieces on eBay. If you want to avoid getting into trouble with the tax man then here are some legal tips for managing your personal finances.
Unfortunately even your savings in the bank are not free from the government’s grasp and you will be taxed on the interest made whilst money sits in your bank. Normally the tax will be taken from the interest at 20% before you even receive it so you have no legal obligation to do anything. If you pay higher rates of tax due to larger earnings then you will be asked to pay the difference between the 20% and the standard rate you pay. Everybody has a tax free allowance at the beginning of each tax year which enables you to put away some funds without being taxed on them. If you’re not sure what yours is or how to make use of it then speak to your bank, a financial advisor or an accountant. It is important to let the HMRC know about any savings you have and to mark these on your self assessment form at the end of the tax year. Failure to do so is breaking the law and could get you into quite a bit of trouble!
Stocks, shares and investments
When you purchase any type of investment like stocks in a company you are likely to have to pay taxes and duties. The tax and duty amounts will depend on where the shares have come from, how you purchased them and how much they are worth. When it comes to selling your investments you will pay tax on the profit you make from it only. Not how much you have sold it for but the difference between how much you paid and how much you sold it for. If you made a loss then you pay no tax at all. Again, this is something which the HMRC must be made aware of using a self assessment form at the end of the tax year. If you fail to inform them of profits made from investments then there will be serious consequences which could lead to a court appearance, fines and even jail time.
What to do if you break the law
Sometimes people are just not fully aware of what they have to put down on self assessment tax forms and what is classed as irrelevant. Out of ignorance more than trying to con the government, many people get arrested for tax fraud every single year. If you find that the tax man wants to take a look through your personal or business finances then there’s not a lot you can do to stop him. If you have not declared the right amounts or failed to report any changes then there is a likelihood you will get in trouble with the law. Talk to a legal advisor and an accountant immediately to find out what you have done wrong and how to get it fixed as soon as possible. In first time cases it could just be a case of paying back what you owe and an extremely sorrowful apology!
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