We've all heard of Tax - But what is it? How does it apply to me? Can I avoid it?
Tax is a compulsory contribution to state revenue, levied by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions.
In short - failure to pay, evasion of, or resistance to collection of tax is punishable by law.
There are many different forms of tax that you need to be aware of, each with their own rules, governance, thresholds and allowable deductions.
The UK tax year runs from 6th April to 5th April.
Below are the main taxes that apply:
So what is ‘Tax’?
Call us today for a free discussion on how we can help to make your company more efficient.
A less risky and better way? Tax planning!?
As we’ve seen Tax is an immensely complex subject. The rules and thresholds evolve and change yearly.
Keeping abreast of this is what our specialists and competent staff at KeyAccountants do. As part of our Continual Improvement policy we keep up to date (and ahead of...) the changes to Tax and HMRC requirements.
So why take the risk of trying to do it yourself? Why not use us as experts in the field to plan your tax liabilities and how this can legitimately be lowered…
So why take the risk….?
On death, inheritance tax may be payable on the deceased persons estate.
The value of the total estate is calculated and a “nil rate band” is applied to this.
Any remaining value in excess of this nil band is subject to inheritance tax which is payable out of the estate and therefore reduces the value of the estate.
Advice is needed well in advance to mitigate inheritance tax.
There are many other sorts of Tax that we can advise on such as Property Tax, Value Added Tax (VAT), etc
your wages from your employer
the income from your Buy-to-Let property
your savings and investments including shares
income from your own business against which you would claim your business expenses
Capital Gains Tax
Tax is payable on all income, subject to various thresholds and limits set in the budget and enforced by HMRC.
HMRC may require you to submit a Tax Return to them if your tax affairs are anything other than simple. Simple is defined as just having one employment income with no benefits in kind with all Tax and National Insurance collected at source, or just having State Pension income.
If you have income from other sources, for example, property (rent or sale of), dividends from shares, inheritance, overseas income, or you are a company director, or a higher rate tax payer, then you may need to register to file a Tax Return to HMRC.
If this applies to you, you only have until 5th October following the tax year in which your extra income arose to register or you face a penalty.
You then have until 31st January to file your Tax Return online with HMRC. If you miss this deadline you will receive £100 penalty.
Income can come from a variety of sources, including:
Understanding what would be allowed as a business expense for tax purposes is a complex subject, but may include:
Repairs and maintenance of equipment used in the business
Income tax is arranged in bracket thresholds, so that the more you earn, the higher the tax percentage you will pay.
There are ways to reduce the tax, such as claiming legitimate expenses, forming a company etc.
Capital Gains Tax (CGT) is payable when a “capital asset” such as houses, shares, antiques or business assets are sold.
CGT is due on the profit which is made on the sale; the amount you sold it for, less the cost that you bought it for originally.
CGT is declared on a self-assessment tax return; this must be filed with HMRC and any tax paid by 31 January after the end of the tax year.
Every tax payer has an Annual Exemption amount to set off against capital gains.
CGT is payable in bracket thresholds, so that the more you earn in total, the higher the CGT percentage you will pay.
There are reliefs and allowances available to mitigate CGT, we can advise on these.
Corporation tax is payable by a limited company on its profits; its income less its tax allowable expenses.
These are calculated at the end of each Accounting Period and the Corporation tax is payable 9 months after this date.
A company structure can be more tax efficient for some businesses, we can advise on this.