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An Introduction to Cyberdosh, where every penny counts. More Th>n Business Car Insurance - More Th>n Business Insurance - More Th>n Business Public Liability Insurance Cyber = virtual, Dosh = cash
PART 2 - TAX AVOIDANCE IS NOT ILLEGAL - WHO SAID THE BUDGET WAS BORING? UPDATED 26/03/08 Please read the relevant sections of HMRC here for all the latest updates as these pages are now out of date Cyberdoshing is a money game, it's about having some fun with your virtual cash and reaping the benefits longterm. Our quotes are from existing Cyberdoshers and show real life examples of how, by taking that one extra step sideways, you can tip the money see-saw in your favour. Remember - many of us, over the period of our lives, are likely to spend more money on tax and interest than on anything else! See HERE for budget living ideas. FUEL TAX - ABOUT 70% - If you are a vehicle owner, for every pound you spend on petrol or diesel, you will be receiving about 30p worth of fuel and the other 70p is tax. For the regular day-to-day urban driver who travels about 10,000 miles a year in a fairly small family car, you are paying around £600 in fuel tax PLUS your Road Tax and VAT. VEGETABLE OIL AS FUEL - Details can be found here on the HMRC website ALCOHOL & CIGARETTES Finding out exactly how much tax is added to a typical 20 pack of cigarettes has practically evaded because there is such a variation in prices. In our estimates, if you are a smoker, then for every 20 cigarettes you smoke in a day, over a year you are spending around £1500, of which, we reckon, about £1,000 of this will be in taxes of one form or another. If you want to avoid paying this tax, avoid smoking. Easier said that done, I hear many say, so... If you want to pay less tax, simply cut down. The easiest way is by buying your cigs weekly and making a promise to yourself that you WILL NOT buy more within one full week. Rather than buying 140 (7 packs), start buying 120 (6 packs) and BANK THE DIFFERENCE. The difference will amount to over £200 within a year PLUS it will earn you interest. But, to be doubly sure you don't blow your chances, remove the money as soon as it reaches £100 and transfer it to Premium Bonds. That gives you 100 chances in each monthly draw to WIN A MILLION! By the end of your first year of cutting down a mere 2.85 cigs per day, you will have 200 entries into each monthly draw AND your money is 100% safe. Yes, you can cash in the Premium Bonds if you need the cash elsewhere. Find out about Premium Bonds or buy online HERE. UPDATE - Cigarettes have been hit again and again. Working out how much of the actual cost is TAX, results in the discovery of the staggering figure of 77.5% (ish) A smoker buying 20 cigarettes per day will now spend around £1,825 per year, of which, over £1,400 will be tax. QUOTE: "I started this Cyberdosh saving tip about 3 years ago. I still smoke around 60 cigarettes a week, but I have stuck rigidly to the bond buying and have now accrued over £2000 worth, and had my first small win! INCOME TAX - Chances are, if you receive any form of payment for anything you do, or don't do, you will be liable to pay Income Tax. Does everyone have to pay it? NO. Each person is allocated an allowance each year - this can be thought of as the amount that Her Majesty's Government allows you to exist on before having to pay them a share of your earnings in exchange for the extra pleasures of living how and where you want. But can anyone actually afford to live on it? INCOME TAX FREE - The current allowance for anyone under the age of 65 is 5,225 per year; that's about £100.16 per week, or £99.93 during a leap year! Income is calculated on everything you receive, including any interest you earn on savings, dividends from shares etc, although this is a separate issue, as the Government has set allocations for how much, where and how you are allowed to save your own money with regards to taxation. But the Government retains the right to change these figures at any time - we usually hear about them during, what is called, 'The Budget'. UPDATE for 2008/9 - Income tax: personal allowance increases to £5,435 equivalent to £104.23 per week or £103.95 per week during a leap year (2008 is a leap year) 10% INCOME TAX - This was charged on the first £2,150 that you earn OVER your existance allowance, which means that if you earn up to £7,185 in one year at £137.79 per week (£137.42 in a leap year) then you pay £215 in income tax to the Government for the priviledge of doing so. But the Government retains the right to change these figures at any time - we usually hear about them during, what is called, 'The Budget'. UPDATE - 10% income tax has been abolished from tax year 2008/9 Details available here 22% INCOME TAX - Ok, so that is us up to earning £7,185 for an entire year. What happens if you earn more? Don't forget, you are allowed to earn as much as you like each year, but it comes at a price! For every penny you earn over £7,185 this year, you MUST pay 22% tax. This payment is compulsory and goes straight to the Government, but earner BEWARE! The 22% tax, naturally, is increased if you go over £33,300! That is equivalent to £638.63 per week, or £636.88 in a leap year. But the Government retains the right to change these figures at any time - we usually hear about them during, what is called, 'The Budget'. UPDATE - £7,185 increases to £7,460, except that after 2009 you will pay 20% tax on everything over £2,230 rather than 10% as the 22% rate is being being reduced to 20% from April 2008 - in preparation for the abolition of the 10% rate - see above!!! 40% INCOME TAX - Don't worry too much, this is the top rate anyone in the UK has to pay. It simply means that everything you earn over £33,300 in this current tax year will be split between you and the Government. For every £10 over this amount, you will keep £6 and send £4 to the Government. But the Government retains the right to change these figures at any time - we usually hear about them during, what is called, 'The Budget'. UPDATE - £33,300 INCREASES TO £34,600 NATIONAL INSURANCE - So, you got as far as earning your first £96 in the hope that you can a) survive and b) avoid paying tax. Unfortunately, you still have to pay National Insurance, which is a form of tax that contributes to certain Government services that are provided, such as basic welfare benefits, including an old age pension if you reach the age of 65. National Insurance is compulsory and collected via your personal National Insurance Number, which you are designated by the age of 16. Again, payments are graded depending on income earning circumstances. But the Government retains the right to change this at any time - we usually hear about changes during, what is called, 'The Budget'. CLASS 1 NATIONAL INSURANCE - If you are employed, you do not need to pay National Insurance on the first £84.00 you earn each week but you WILL pay 11% of anything over that up to £645 per week. Thereafter, there is a 1% taxation, or so I believe. I am not even going to hazard a guess, let alone try to explain in simple terms, how the National Insurance contributions schemes all function. Best just to know that it is compulsory, so long as you are accruing more than £84 per week. Although these payments are collected via each person's National Insurance number, we do not have direct access to individual account balances, nor can we make withdrawals; these are at the discretion of the Government and are made by way of various Social Security Benefits, pensions and payments. Some people manage to claim thousands of pounds via this system, whilst others make regular, compulsory deposits throughout their entire working lives and then die, without a single day's illness, before receiving their retirement payments. These are not transferrable or inheritable. UPDATE - Class 1 increased to £90 - National Insurance Contributions are being 'realigned' with income tax bands, so that people earning up to £43,000 a year will pay 11% NICs All updates can be found here VAT - VALUE ADDED TAX - This is added to most goods and services in UK and is currently set, by the Government, at 17.5% for Standard Rate, 5% for Reduced Rate and 0% Zero Rated. As a general rule, VAT is divided between needs and wants - it applies to everything that we want to buy and should, in theory, be exempt or zero on the basic essentials that we need to survive. However, understanding the difference between 'needs' and 'wants' can be a ridiculously difficult task. Plus, the Government has the right to change their terms and conditions at any time - we usually hear about them during, what is called, 'The Budget'. VAT is chargeable on other existing taxes, eg Fuel is heavily taxed and then the VAT calculated on the total. VAT Exempt Goods - no VAT payable The following goods and services do not attract VAT on top of their prices - Insurance Some dental services, but not all. Some medical services, but not all. Some types of educational training, but not all. The Government has the right to change this at any time - we usually hear about changes during, what is called, 'The Budget'. Reduced Rate VAT - 5% VAT payable Nicotine patches - from July 2007 Domestic fuel or power Installation of energy saving materials Grant funded installation of heating equipment or security goods or connection of gas supply Renovation and alteration of dwellings Residential conversions Women’s sanitary products Children’s car seats The Government has the right to change this at any time - we usually hear about changes during, what is called, 'The Budget'. Zero Rated VAT - 0% VAT payable Food - but not all foodstuffs are zero rated! *1 Books, newspapers and magazines *2 Children's clothes Equipment for disabled people The Government has the right to change this at any time - we usually hear about changes during, what is called, 'The Budget'. VAT Registration for Businesses As a general rule, if you set up a business, you MUST register for VAT if your annual turnover is £61,000 or above. Below this level, it is not compulsory to register, although some do. The Government has the right to change this at any time - we usually hear about changes during, what is called, 'The Budget'. Exceptions to the Basic Rules *1 - Only the actual raw food product is zero rated. Vat registered companies charge tax on the processing and packaging of the goods etc, which means that you WILL pay tax on, for example, a microwave dinner, a ready cooked meal, a takeaway, a meal in a restaurant or hotel etc... check your grocery receipts to see where the VAT does and does not apply. It is not essential to buy food ready prepared, it is simply a convenience. Buying only zero rated foodstuffs avoids your having to pay this particular tax, but as soon as you cook them, you are paying the tax for the fuel and power you use to do so. *2 - Vanity publishing occurs when an author who is unable to have work published pays a publisher to do so. If the publisher produces books which are all delivered to the author, the payment by the author is a consideration for a supply of books and is zero-rated. If the bulk of the books remain with the publisher, payment by the author is partly for the supply of books (zero-rated) and partly for publishing services (standard-rated). Follow a year in the life of Shona Prophett as she accepts the Cyberdosh 2007 Challenge to live on no more than £4,000 for a full year, beginning 01 January 2007. |
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