Did you know that the British tax system dates back to the Roman occupation? The decree of ‘thou shalt pay tax’ has since continued to be a source of frustration for many people.
Who pays income tax?
Basically everyone pays tax, even children. There is a common misconception that children are exempt for taxation – unfortunately this is not true. If a child’s income exceeds the sum of £100 per parent it is treated as the parent’s income and is therefore liable for taxation.
How is income tax charged?
Income is classified under various categories. For example income from employment, self-employment, land, property and investment income each have their own individual calculation rules for tax purposes.
The various categories are added together to arrive at total income. Income is subject to reduction, if appropriate, for certain allowable deductions and personal allowances in arriving at taxable income. The tax calculated thereon is then reduced by certain other deductions and allowances, if available.
Personal tax allowance
A personal allowance is available to individuals resident in the UK and in certain cases to non-residents. The level of personal allowance depends on the individual’s age, and is increased from the tax year in which the individual reaches the age of 65. Higher age-related allowances are reduced if the taxpayer’s income exceeds a specified limit.
Managing your taxes
Tax avoidance is illegal and is a classed as a criminal offence. However it is perfectly legal to arrange your finances in a manner fitting to your personal circumstances that results in you paying less taxes – what are you currently doing about your taxes?