An Introductory Guide To Self Assessment And Income Tax
The income tax in the UK is something which many people find terrifying; this is partly due the complexities of it. Before you start to pay or worry about your UK income tax there are a few things you should understand.
If you are employed then this is the system which your employer will use to deduct your tax before you are paid. Depending on your other incomes and the amount you earn you may still have to complete you own tax self assessment form.
This is the system which the government introduced to manage the incomes which are not earned and paid through the PAYE system. This requires the completion of a form each year. It is essential that these are completed correctly and on time. If you do not file taxes online meet the dates and deadlines you will probably be liable for a fine.
This was originally designed to support the social security benefits systems, however, it has now becomes a general tax which you will need to make sure you pay just like income tax.
Tax relief is available on various things, the most obvious is money donated to charity. If you are donating to charity you will have noticed the Gift Aid option, this means that your donation is increased by the government to refund the tax.
So how do you know how much tax to pay? This is the million dollar question! There are different ‘brackets’ of tax. This means that depending on the amount of money you earn you pay different percentages of tax. These are reviewed by the government as a part of their annual budget, so if you are hoping to calculate your own tax, be sure to check that the figures you are using are up to date.
Another thing which will affect your tax is your personal allowance. This is the amount of money you are allowed to earn before you have to pay any tax at all. As with tax brackets, this amount changes annually with the governments budget report.
Finally there are not tax credit. This are designed for those on a low income and are to help reach a certain level on monthly income believed to be necessary. These are two types of tax credits; working tax credits and family tax credits. The system to calculate these is all rather complicated. However, to apply is simply a matter of completing various forms and submitting them. If you are unsure whether you are eligible or not then you can contact the relevant department or you can simply fill in the form and if you are not considered eligible you will be advised by post. Since this system was introduced a large number of families missed out on these because they did not understand the system – don’t become one of these statistics. Check with your UK income tax office to get the forms.
So all in the self assessment and income tax in the UK is a fairly complicated system and you are always best seeking expert advice either through an accountant or a government office.