Income tax is a type of tax that is paid by UK taxpayers to the government from their own income. Not only are you taxed on personal income, you might also be taxed on other sources of income, such as from interest on savings or dividends.
When they issue your tax code, the tax authorities don’t always get it right. Mistakes are made and over or under payment can easily occur. By entrusting Makinson & Co with your tax affairs, you can rest assured that you and your staff will pay the right amount of tax. We’re always available to help sort out any issues that might occur. There are some things in business that you’ll want to do for yourself. That’s natural and we encourage it, but sorting out your income tax and that of your employees is not one of them. That’s because the issues that can arise from getting it wrong are potentially serious and, frankly, just not worth risking. Call for advice today. Your initial consultation is always free.
What is it and what is it used for?
Income tax is the monthly payment taken by the government from your yearly income. If you are self-employed, you will then pay taxes on any profit that is made. This will include income from services and products that are sold online.
Income tax is the UK government’s primary source of revenue and is collected by HMRC on their behalf. The government will use the revenue generated from income tax to provide different funding for public services such as the welfare system, education, and the NHS. This revenue is also therefore used for other investments for public use that include housing, railways, and road construction.
Income tax will apply to most types of different income, including the salary earned from your job, profit earned from pensions or business, and even the rent that is received from a landlord. Estates, corporations, and other forms of entities are also typically required to pay tax on these profits.
You may not also have to pay income tax on all of your income, because a lot of people qualify for one or more types of tax relief. This allowance is the amount of taxable income that you are allowed to earn before paying your income tax.
How is it calculated?
Income tax is typically made up of different ‘bands.’ Your income tax will then be calculated based on the income tax band that you sit in. The more income that is earned, the higher your tax band is likely to be, which means you will have to pay a higher amount of income tax. Income tax bands are then designed to make paying tax as fair as is truly possible to everyone equally.
What are the rates?
The following results show the required income tax rates for the UK, based on how much you are earning in the tax year of 6 April 2021 to 5 April 2022.
Income tax band Taxable income Tax rate
Personal allowance £0 – £12,570 0% – No income tax payable
Basic rate £12,571 – £50,270 20%
Higher rate £50,271 – £150,000 40%
Additional rate Over £150,000 45%
Makinson & Co. are your local accountant team situated in the Forest of Dean. We have over 40 years’ experience in all tax matters, and work with small to medium sized companies in and around Gloucestershire. If you would like to know more information about what we do and how we can help, take a look at our website www.makinsonandco.co.uk or give us a call on 01594 842188 – we’d be happy to help!