Basic questions about your bills; saving your money, tax and the stock market

We spoke to Adrian Cooper, a previous Accountant turned Finance Director and CFO. So we’ve got money (finally), When is the best age to start saving? How do the tax brackets work? When do I pay? What the hell is an accountant?

When is the best age to start saving?

As soon as you can. You have to ‘save to accumulate’. The sooner your money has the chance to earn interest, the longer it has to go up in value. This also means now is the best age to start contributing to your pension. This also means it has more time to ‘ride out’ swings in the general economy (e.g. recessions, that happen each 10 to 15 years).

How do the tax brackets work?

This year, the UK Government gives you a tax free allowance of £12,570. So let’s assume you earn a gross salary per year of £40,000… The first £12,570 you earn has zero tax applied to it. The next rate/band of tax is 20%, and this tax rate is applied to earnings from £12,571 to £37,700 [meaning £25,130 of your money is then taxed at 20%]. The 40% tax band applies to earnings that are above £37,700 per year. So, if you are earning £40,000, £2,300 of your earnings are then taxed at 40%. After tax, you then walk home with a total of £34,054.

What do I need to know about my tax obligations?

When you earn over the minimum tax-free amount, you start paying taxes. This is £12,570 in the UK for this year. And from then, it is very hard to legally pay little or no tax! If you earn only ‘cash in hand’….you are still obliged to declare this to HMRC. Your tax should be deducted from from salary/wage deductions so come tax season you shouldn’t need to do anything. 

Last of all, what the hell does an accountant actually do?

There are three different bodies of accountants, but let’s not get into that. Essentially an accountant controls the cash receipts and outgoings of an organisation or person, and ensure that all the book-keeping is done correctly, to make sure all activities are recorded appropriately and legally.

What is the stock market?

The stock market is a regulated platform that allows certain companies to offer you a £ share of their company, in return for your cash investment. But, this does not mean that the management may not make bad decisions, and the value of your investment can fall. The Stock Market is all about Supply [of shares] and Demand [the share price]. There is a finite number of shares that a company can ‘list’ on an exchange – and if there are more people wanting to buy that share than there are shares, the price of each share will rise. [demand outstrips supply]. If an investor thinks that in the future, a company will have great trading performance and profits, they may invest now to enjoy the investment returns in the future. This pushes the share price up. Conversely, if lots of shareholders start to sell their shareholding in a company, the share price will fall.

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