A self-assessment tax in UK simply means the amount of tax that is paid on an individual’s income by the help of his tax advisors, after the assessment of income has been carried out by the authorities. It is not necessary for the person concerned to have made his income payments, in order to take the self-assessment tax. There are a lot of people who do not even know about the amount of tax which they pay, till their financial experts or accountants enter into the picture. The self-assessment tax has become very common in the UK in recent times as it has been found that a lot of taxpayers have paid too much tax, and thus, have earned a lot of back taxes by the UK authorities. This has resulted in a lot of problems for the UK citizens as well, leading to a rise in crime such as tax evasion, fraud and forgery.
The Term Self-Assessment Tax
The term “self-assessment tax” itself implies that the tax paid on an individual’s income for a financial year is calculated by taking his total estimated tax payments, over a period of one year, into consideration. The total estimated tax payments referred to here are those that the taxpayer actually pays in one financial year. In case of some taxpayers, this total may be higher than the income tax payable on them in a single financial year because of various mitigating factors. For instance, individuals who receive some non-guaranteed annuities and pensions or individuals who incur interest or dividends and in some cases do not claim the full amount on their tax returns, can qualify for the self-assessment tax.
Certain Circumstances Under Which a Taxpayer may not Need to Pay any Income-Tax at All
There are some certain circumstances under which a taxpayer may not need to pay any income-tax at all. He can claim deductions for interest paid on loans taken by him, if he did not deduct these from his gross income. Similarly, there are some taxpayers who can claim deductions for the expenses they incurred on traveling abroad. A taxpayer can also make use of the advance tax scheme provided by the UK government. Under the scheme, the taxpayer receives an additional amount of tax relief once he buys or sells a certain asset within the jurisdiction. However, there are certain rules and regulations that are to be followed by taxpayers in order to take advantage of this scheme.
Benefit from Self-Assessment Tax
Citizens of Ireland and other European countries can benefit from self-assessment tax. This is so if they meet the requirements of the UK government under the personal allowance scheme. The personal allowance is a fixed rate of income tax. In case of a UK citizen, his personal allowance would be tax free. However, in case of an immigrant or alien who is not a UK citizen but does not fall under the immigrant category, he may have to pay tax on income derived in the UK. If he lives in the EU, he has to pay tax only if he is a residence permanently settled.
A Taxpayer can Choose Between Two Forms of Income Tax
Personal allowance and general social charge. If he has a personal allowance, he pays no income tax. He gets to claim the same amount of tax as the allowance. If he lives in the UK, he gets to enjoy the benefits of EICI, which is essentially personal allowance plus an additional 20% tax credit. The UK government provides online help in the form F1: the Income Tax Helpline.
Prepare the Yearly or Quarterly Tax Returns
For many taxpayers, preparing their yearly or quarterly tax returns using the single tax return software package, either online or by visiting a tax office, is too much trouble. For them, there is Self-Assessment Tax Calculator available in the internet that can calculate the tax liability on a given income level easily. Some self-employed individuals also use Self-Assessment Tax Calculators to take care of their joint tax returns. The main advantage of using the calculator is that it can be used for preparing both online and paper tax return.
A Self-Assessment Tax Return can be Prepared by Using the Single Tax Return Software Package
A self-assessment tax return in high wycombe can be prepared by using the single tax return software package, either online or by visiting a tax office. It contains a field to enter the taxpayer’s personal allowance and to add up all other relevant categories of income such as business earnings and dividends, land and property, contributions to UK pension schemes, etc. The calculator can be used to find out the exact amount of personal allowance to be deducted or added to the personal allowance to get the taxable income on which the tax is calculated. The calculator can also be used to find out the exact amount of business income that needs to be included in the business tax return and so on. It is estimated that around 4.5 million households in the United Kingdom use this self-assessment tax return tool to prepare their annual tax returns.
There are three Ways to Pay Self-Assessment tax
The first way is to deduct from all income from wages or salaries. The second way is to deduct only part of an income or to double the amount of income and then to subtract it again. The third way is to deduct the entire income and nothing more. The calculator can be used to determine which option to use for a particular taxpayer. If a deduction is not allowed by the UK tax law then the taxpayer may have to pay the tax amount without taking any further deductions.
