UK Tax Law affect every person regardless of what they do or how much they make. Every person is required to pay some form of taxes. Understanding the most important aspects of tax law can help you when preparing your taxes or preparing your documentation for someone else who is doing your taxes.
The most important things to understand are how much of your income you must pay in taxes, which deductions you are able to get, how to calculate your income, and what assets you must claim.
Knowing How Much You Will Be Taxed
There are several different income brackets. Knowing which you fall under is important as that will tell you what percentage of your income can be taxed. If you are in a higher bracket you have to pay a larger portion of your income. If you are in a lower bracket or make below a certain amount you will a much smaller portion of your income.
If you are in a special type of bracket, such as a person who is an independent contractor, or who invests in certain types of markets will have different rates than the traditional tax brackets. For example, if you are an independent contractor you will not be taxed on the income as you receive it, but you must claim it on your taxes and the rate is usually 25%, but this can vary on the area you are in. If you invest in certain specialty markets, such as venture capital, then you will pay a significantly smaller percentage of your income.
There are also varying tax brackets for married couples and families. Depending on the total income of the household you may fall into a different tax bracket.
Know Which Deductions You Are Eligible For
There are many deductions you may be eligible for when filing for taxes. If you have dependents in your household that may be a deduction. Depending on the property you may own or your line of work you may be able to obtain deductions from that as well.
For this purpose it is useful to hire a tax professional as they will be able to get you all of the deductions you are eligible for without you having to worry about which you may have missed. Doing your own taxes can be tough and with the multitude of deductions available it is good to get a second to ensure you get the highest possible refund.
Know What Income and Assets to Claim
Reporting all assets you have, both domestic and foreign are important to properly filing taxes. There have been many people who have suffered serious consequences for failing to report certain amounts of income or assets. Do not try to hide assets off-shore either. There are increasingly stiff penalties for failing to report foreign assets.
Be sure you claim all income that needs to be claimed and is taxable. If you do not, not only would you risk having an audit done, you may also face criminal charges for what you have done. You can be hit with a stiff fine and in extreme you can go to jail for a period of time depending on the amount of the assets hidden.
Tax codes can be very complicated when you actually delve into doing taxes. There are many loopholes and deductions. When you prepare your taxes or have them prepared be sure everything is done carefully. It needs to be methodical and it needs to be thorough.
If you prepare your own taxes then you should find someone to take a second look just to make sure everything is correct. A second look may actually help you get a higher refund. Be sure to keep all receipts and proof of any charitable donations you may have given. This is especially important because if you cannot properly prove the charitable deduction it will be as though it is ignored. Make sure you have everything you need to file properly. You should know all of your income for the previous year and have proof to claim all assets that are necessary to claim. If you have any questions be sure to ask a tax expert.