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Introduction
In the UK the greater bulk of income tax which flows into the exchequer does so by deduction at source. The tax is taken from income before it is paid to the taxpayer and most of this happens by way of Pay-As-You-Earn (PAYE). This collection system will no doubt be familiar to almost everyone who is in employment and also to those who receive pensions.
Most of the rest of the income tax collected at source comes from deductions made by banks or building societies from interest paid to savers. Most of us, children, retired folk or working people alike, will have savings accounts of one sort or another and many might also have shares from which income arises in the form of dividends. These too are treated as having suffered income tax at source.
As these circumstances cover the overwhelming majority of individuals, more than 80% of the population will have little or no regular contact with HM Revenue and Customs (HMRC), the organisation that administers and regulates all taxes in the UK.
Tax Planning
If not asked to complete a tax return, it remains the taxpayer’s responsibility to advise HMRC if there is a new source of untaxed income or a capital gain that will lead to a tax liability. Please contact us for further advice if this affects you. |
Around 9 million taxpayers, however, will have something more than a regular income taxed under PAYE and interest on savings. Instead they might have income from their own business or receive rent from a property. Alternatively, it may be that their income is high enough to attract higher rate tax so that the tax deducted at source is insufficient. These taxpayers may be asked to complete a self assessment return each year and then they will have direct contact with HMRC.
However, income tax is not the only means by which the government relieves us of our hard earned cash. You may own assets such as a precious antique, a second home or shares. If such an asset is sold, the chances are that a profit will arise and this may give rise to a liability to capital gains tax. Details of any capital gains may have to be included on the self assessment return.
Inheritance tax may be payable on the assets that you give to others in your lifetime or leave behind when you die. At one time very few individuals had to worry about this tax. However, rises in house prices have changed that and many more estates have now become liable. Careful planning can help to minimise this tax but it means that more and more of us cannot ignore this potential burden on our estate.
Many of those in business have to understand the principles of value added tax because they will have to act as an unpaid collector of this duty. In addition, those who run their business through a limited company will be concerned about corporation tax - a tax on their company’s profits.
Tax Planning
Remember to keep all tax related documents such as interest statements, dividend vouchers, P60 etc. Place everything in an envelope or folder through the year as it is received. Then you can simply hand this to us when we need to prepare your SA return. |
This booklet is designed to provide you with a simple guide to all of these taxes from five perspectives - that of the family; the working man or woman in employment; the person running their own business; the taxation of investments; and, finally, knowing that nothing is certain except death and taxes, the potential liability on your estate!
Please use the guide to help you identify planning opportunities, pitfalls to avoid and areas where you may need to take action and then contact us for further advice.
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Self assessment (SA) timetable
- Income tax and capital gains tax are both assessed for a tax year which runs from 6 April to the following 5 April.
- Shortly after 5 April - SA returns are issued by HMRC.
- 30 September following - paper returns must be submitted if HMRC are to calculate the tax due.
- 31 January following - final date for submission of return and all outstanding tax to be paid.
- There is an automatic penalty for late filing of the return of up to £100 and more serious penalties for on-going default.
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