personal tax

Tax, not a topic very many people enjoy! Tax and income tax, in particular, is one of the main revenue generators for our government. The taxes we pay fund social needs such as the police force, education, social security benefits and defence. Whether you agree with tax or not, it is here to stay and failure to comply with the laws can lead to serious legal sanctions.

Income Tax

Income tax is simply a tax on your income. If you are an employee and your employer pays your tax through the PAYE (pay as you earn) scheme, it is likely that the only real contact you will have with your tax situation is frowning at the bottom line on your pay slip!

Bear in mind, however, that if your earnings change dramatically, during the tax year (which runs from April 5th), you may find that either you owe the Inland Revenue more tax or they owe you a tax refund.

Self-employed individuals have to complete their own tax assessment, which is a form filling exercise and can be done online.

If you receive income from sources such as rental income or fringe benefits such as a company car, these will have to be declared and may increase your tax bill.

The level of tax payable depends on your total income. The more you earn the higher the percentage of tax you will pay. The current maximum is 40%.

Capital Gains Tax

Most commonly referred to in property transactions, capital gains tax is simply a tax on any gain made from disposing of an asset. There are exceptions, such as the family home, if you have lived in it as your main residence. Similarly, there are reductions available for expenses accrued from the asset such as selling costs. Any gain over £8,500 (for the tax year 2005 / 2006) will, however, be taxed at the same rate as your income tax calculation.

Inheritance Tax

Inheritance tax can be a very complicated issue. However. a very brief overview is that tax at a rate of 40% is charged on all estates that exceed £275,000 (as of March 2005). The tax is only paid on the amount that is in excess of the threshold.

Tax is not an easy subject - it really does pay to get comprehensive planning advice, if you are in any doubt.

Personal Tax