Are you struggling with your self assessments for tax purposes? In the UK, most income is under PAYE, pay as you earn, system. Under this system, your employer will withhold specific amounts every pay period to cover your taxes, national insurance contributions and other applicable deductions. For most people, this is the end of the story with no need to submit any documentation or prepare any kind of tax forms.
However, in some cases, you may be required to complete a self assessment. Potential Scenarios:
- Self employment income
- Interest and dividend income
- Income from abroad
- Profit from selling shares or property (capital gains)
- You have deductions to reduce your tax bill that your employer did not figure in (mileage, business use of home etc..)
Wading through the self assessment process can be time consuming as well as confusing, especially if you are a salaried employee. Here are a few basic deductions you may be able to claim:
- Mileage- if you drive for your employer and are not fully compensated, the difference may be deductible
- Charity- depending on your tax bracket, you may be able to deduct charitable donations
- Uniform- if you are required to wear a uniform for work and it is not provided by your employer, you may be able to deduct the cost
- Professional Fees- certain fees for professional organisations may be deducted
These are a few of the many deductions you could claim on a self assessment and lower your tax burden. If you are self employed or independent contractor, the deductions are somewhat different, here are a few:
- Business use of Home- a portion of your utilities and mortgage may be tax deductible
- Phone and Internet service
- Business equipment such as computer and printer may be deductible
As you can see, there are a number of items that can reduce your liability for tax. The problem many people will face is the conditions placed upon claiming some deductions. For example, if you use a home computer for your business, you may not be able to deduct the full purchase price if it also doubles as a personal device for you or your family. Likewise, mileage rates are capped up to a specific number of business miles after which point, the amount per mile is reduced.
When it comes to your income, the goal is to keep as much of it in your pocket as is humanly possible. This is where a qualified accountant or tax professional is priceless. They are familiar with the tax codes, deductions and credits and can quickly put together your self assessment.