If you are preparing to enter the world of work or have recently started your first job, congratulations! Your new job brings lots of great opportunities. Alongside the independence afforded by an income, there are a few extra financial responsibilities.
Getting your finances in order from the very beginning and creating good habits will stand you in good stead for completing your first income tax return. It can seem like a daunting task, but it’s usually pretty straightforward so long as you have kept accurate records.
In Guernsey, tax is payable on all of the money that you earn or receive, for example from Saturday jobs, office work, online income from blogging or streaming or bank interest. The States of Guernsey gives everyone an allowance - an amount that you may earn without paying any tax - currently £10,500 for the 2018 tax year. Also, the first £50 of bank interest you receive is exempt. If you are working weekends and school holidays around your studies, you are unlikely to be earning in excess of this amount, however, you may still need to complete a tax return in order to prove that you do not need to pay.
If you are working more hours you may well be earning over the £10,500 threshold and in that case everything that you earn above that amount during the tax year (1 January to 31 December), will be taxed at 20%. In order to deduct the correct amount of tax from your pay, your employer will need your tax coding. Contact the Income Tax Office with details of your job and they will send copies to you and your employer.
Tax returns must be completed for each year, unless the Income Tax Office write to you to let you know that you are not required to do so, and these are available to complete online via gov.gg from January the next year. So, for income earned this year, you will be able to submit your return online from January 2019 and it will be considered late, and penalties may become due, if not submitted by November. The form collects information about you and your employer(s), the money that you have earned and any other factors which would affect your allowances.
In order to complete your return accurately it is therefore important to keep copies of payslips from your employer, especially if it is the last pay slip of the year (which should give details of your annual totals) or if you are changing jobs and it is the last pay slip from that company. Also, keep a note of other income, such as bank interest, as it arises to save you trying to work it all out later.
It’s a good idea to get into the habit of checking your payslips when they are given to you so that you can pick up any discrepancies with your tax coding so that they can be corrected at the time – if your employer doesn’t deduct enough from your salary you could end up with a surprise bill when you submit your return.
You should also be paying 6.6% of your salary to the Social Security Department if you earn over £7,176 in the calendar year 2018. This is a contribution towards your old age pension and any other benefits you may claim during your working life such as sickness benefit or maternity benefits.
If you follow the above advice you can keep on top of your financial responsibilities and you can get on with enjoying the rest of your income.