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how do I pay this tax?
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Again, this is a complex subject, but it is important to remember that it is YOUR responsibility to ensure you pay the correct amount of tax on your income. The Inland Revenue has introduced a system called Self-Assessment and this means that it is up to you to work out how much you must pay. However, the good news is that the Inland Revenue will calculate the tax payable if you want them to. At the end of the day, though, it is your responsibility to pay the correct amount of tax and if you avoid it, either through error or deliberate avoidance, you could be fined or in extreme cases imprisoned.
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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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