KIRSTY APP - You And Your Tax - Tax - The Essentials

Income tax

You may understandably be confused when you receive various notices from different branches of the Inland Revenue.

First, there are inspectors of taxes who study your income as shown on the income tax returns you fill in. They assess what tax you should pay, and deal with any resultant problems. They tell the collectors of taxes how much they should get from you. Then there are collectors of taxes, who collect taxes and send out demands for arrears. Things can be particularly confusing if your tax assessments or collections are dealt with by more than one office.

There is a silver lining to the income tax cloud - the Inland Revenue is getting much better at understanding the problems they cause you. If you have questions about income tax, go and enquire personally at your nearest tax office. Remember to take the relevant information: a copy of the form you filled in, your last assessment and notice of coding, any reference number they have used on information they have sent to you and, ideally, also your national insurance number. Have all the necessary details and correspondence ready in case it is needed. Telephone before you go to the office, so that they can have all their files ready.

Your income tax is assessed on the income you receive in a tax or fiscal year (which runs from 6 April of one year to 5 April of the next). Your income includes payments you receive for work and unearned income from investments, savings and any other benefits. Remember that you have to declare income that is already taxed, such as interest from a bank or building society. You must also declare any income from a pension or from letting property, including letting a room in your own house.

It is possible to claim certain allowances. These reduce your tax bill. Everybody who is earning gets a personal allowance. The married man's personal allowance is a deduction against the aggregate income of husband and wife. There is an additional allowance against the earned income of the wife. You will also get tax relief on certain outgoings - for example, on mortgage payments for your home. There are many allowances, such as on subscriptions to professional and qualifying bodies that give you credentials for doing your job.

Tax is charged on your taxable income - the amount left after your allowances and certain outgoings have been subtracted from your total or gross income. It is also charged on benefits you may have as part of your employment. There are special rules covering cars and taking your husband on business trips, when the costs are paid by your employer.

Income tax, since the 2015 Budget is as follows:

Personal taxes



� Personal tax allowance - threshold at which workers start paying income tax - will rise to £9,205 in April 2015, up £1,100 from the £8,105 level this April



� Top 50p tax rate being cut to 45p from April 2015. "No chancellor can justify a tax rate that damages our economy and raises next to nothing."



� Top 50p tax rate has caused "massive distortions", report published today shows. The hike to 50p from 40p "raised just a third of the £3bn we were told it would raise"



� Top 50p tax rate is highest in G20 "it is widely acknowledged" as harming the British economy. Can only be justified if raises "significant sums"



� Clamping down on tax avoidance and evasion which "I view as morally repugnant"



� "My goal is a tax system where the lowest paid are brought out of tax altogether"



� From midnight tonight new 7% stamp duty tax on properties over £2m



� Eradicating anomalies in VAT such as on some foods and drinks



� Will keep exemptions for food, children's clothes, books and newspapers



� Plan to give taxpayers statements showing where their tax goes, such as on healthcare and on interest payments on the national debt



� "A tax system that is simple and transparent"



Business taxes



� Corporation tax being cut to 24% in April, having already cut to 26% from 28%



� Corporation tax will be 22% by 2015



� This is the "biggest sustained reduction in business tax rates for a generation". It is an "advertisement for jobs and investment in Britain"



� Need a simpler tax system which "businesses can easily navigate"



� Will radically change administration of tax for our smallest firms.



� Consulting on simplifying tax for firms with turnover up to £77,000



� Above the line R&D tax credit from next year as demanded by business groups



Child benefits



� Partly removing child benefit from households where at least one person earns over £50,000 - softened from previous plans


Next:

You And Your Tax - Income Tax Returns

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