02 Nov Understanding Self Assessment in Bury (Jargon Free!)
Self-assessment in taxation is used to mean a tax collection regimen where a taxpayer assumes the responsibility of the accurate computing and reporting of their tax liability to a revenue collection agency. In this case, self assessment Bury, reports all returns to the HM Revenue & Customs. This system is used by the UK government collect income tax. Tax is deducted automatically from all earnings, pensions, wages and savings. All other income sources must be reported in a tax return.
Self-assessment strikes fear into most people. Freelancers, businesspersons and contractors all face the juggernaut of filling tax returns and calculating how much tax is owed. It is a daunting task especially for first-timers, who need to track their records and get in touch with their accountants. One can easily end up facing penalties on late returns and if forms are improperly completed. Tax paid is dependent on which income tax band one is in.
Payments are made twice on 31 January and again on July. Any balance still due is paid on the next 31 January. A late tax payment warrants an interest running from the day after which tax was due. A 5% surcharge is owed if any amount of the tax is unpaid by February 28, end of tax year plus another 5% surcharge at the end of July. You should also pay tax on capital gains on disposals between January 1 and September 30 the next tax year.
Self-assessment does not necessarily mean that one, strictly, has to prepare own tax returns. They can seek assistance from friends and family or get professional help. Low-income earners can access tax-free advice from professional bodies like Tax Aid or Tax Help for Older People. You can also get help with understanding tax codes.
The tax revenue will only ask questions if tax returns do not add up or seem suspicious. On occasion, they will randomly check returns even when nothing appears wrong. However, it takes them about one year to notify individuals of inquiries against them. Though the revenue rarely raises assessments, they will send statements of account to payers.
It is an obligation of all taxpayers to keep evidence in form of records under self-assessment. This is because all figures in the tax returns ought to be supported. It is a requirement that all records concerning self employed income and personal income be kept for five years. However, PAYE and investment income only requires one-year-old records kept. Penalties are charged on any person who fails to keep their tax records.
The law statutorily obligates all employers, to provide employees with all necessary information. Moreover, within a certain deadline to allow the employees time enough to complete tax returns. Other employer responsibilities include furnishing employees with form P60 before 31st May after the tax year-end. In addition, one copy of the form P11D by July 6 after the tax year ends.
In a partnership situation, partners are assessed individually as concerning their profit share in the enterprise. The partnership venture needs to complete tax returns for partnerships. Moreover, individual partners are separately responsible for all tax of their profit share.