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how do I pay this tax?
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If you are employed tax will automatically be deducted from your wages. You will be given a tax code which tells your employer how much tax to take from you.
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If you are self-employed you will become part of the Inland Revenue's self assessment system. This means you have to work out how much tax you owe. The Inland Revenue will calculate the tax if you want them to as long as you tell them in good time.
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Tax is a complex subject. It is your responsibility to ensure you pay the correct amount of tax on your income. If you avoid paying tax either through error or deliberate avoidance then you can be fined or even go to prison
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In most situations the payment of taxes is fairly easy, as follows: |
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Type of income
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Way tax is paid
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Interest on bank account
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The Bank will automatically reduce your interest by taxing it at source.
If you do not earn enough to pay tax you will need to fill in a form that you can obtain from the bank.
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Wage from employment
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Normally your employer will take the tax from your wage before you receive it.
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Income from self-employment
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You will need to pay tax in two lump sums – in January and July every year. You will need to inform the Inland Revenue what your profits are every year. You may need help from an accountant with this.
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This is a very simplified version of the taxation system and there are some complex rules that you may need to learn about if your income is more complicated, for example, if you are eligible for benefits or tax credits. In general terms, the more you earn the more you will have to pay in tax, so it is important that you make sure you get it right. There are ways of reducing your tax bill and organisations such as the CAB or Connexions can advise on this.
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