UK income tax

What is UK income tax?

Personal income tax is regulated by the Income Tax Act 2007 and other acts. The rate of income tax a person must pay depends on how much of their taxable income is above their personal allowance in the tax year. The current tax year runs from 6 April 2017 to 5 April 2018.
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What is Personal Allowance?

Most taxpayers’ Personal Allowance is £11,500 per tax year. This is tax free allowance for all the residents.
The personal allowance goes down by £1 for every £2 that the taxable income exceeds £100,000. This means that the personal allowance is zero if the taxable income is £120,000 or above.
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What are UK income tax rates?

For earned income of £0 to £32,000 above the personal allowance, which means £11,000 to £43,000 of gross income, the basic income tax rate is 20%.
The higher rate of 40% applies when the gross earned income is £43,001 to £150,000.
There is an additional 45% rate for earned gross income exceeding £150,000.
There are different tax rates for dividend and savings income.
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What is personal tax year in the UK?

The personal tax year runs from 6 April to 5 April.
The tradition goes back to medieval times and it was originally based on the church year.

What is Self Assessment tax return?

Self-employed sole traders, partners in business partnerships and company directors must file self-assessment tax returns.
When registering for the first time you get a Unique Taxpayer Reference (UTR) number.
When re-registering you need to use the same UTR as last time.

Who must send a tax return?

You’ll need to send a tax return if, in the last tax year:

You were self-employed

You have £2,500 or more untaxed income, for example from renting out a property or savings and investments

Your savings or investments was £10,000 or more before tax

You made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gain Tax(CGT)

You were a company director- unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits like a company car

Your income (or your partner’s) was over £50,000 and one of your claimed Child Benefit

You had income from abroad that you need to pay tax on

You lived abroad and had UK income

You received dividends from shares and you’re a higher rate or additional rate taxpayer

Your income was over £100,000

You received a P800 tax calculation from HMRC saying you didn’t pay enough tax last year- and you didn’t pay what you owe through your tax code or with a voluntary payment.

When to file Self Assessment tax return?

Once registered you will usually get a letter in April or May from HM Revenue and Customs asking you to send a tax return latest by 31 January. You should send your tax return, even if you don’t have any tax to pay.
You should register by 5 October following the end of the tax year you need to send a tax return for. This way, you will have enough time to complete the registration before the tax return and any tax is due. For example, you should register by 5 October 2016 to send a tax return for the year 2015-16.
You should file your paper tax returns by 31 October 2016 and online tax returns by 31 January 2017. The final payment of any tax due for the year 2015-16 is 31 January 2017.