Self-Assessment Tax
There are a number of questions that must be answered when you are looking into how self-assessment tax is calculated by the accounting firms in the UK. The UK business and income levels in the UK have changed dramatically in recent years and this has meant that a lot of people have earned a great deal more income than they did a few years back. It is essential that the UK companies have to pay out this extra income but at a higher rate than the taxes that are charged on the salaries of the people that have rendered services for the UK.
UK Tax System
The UK tax system is based on the number of days that a person has worked in the UK. However, the latest changes to the tax system means that the amount of income that one can be liable to is different from the number of days that one has worked in the UK. This is the main reason why an individual has to get professional help and this is where the concept of the self-assessment tax calculation comes into place. The online accounting firms have made sure that they provide all of the help that an individual needs in calculating the tax that he will have to pay.
Tax Liability of an Individual
In simple terms, the tax liability of an individual who works in the UK depends on the number of days that he has been working outside the UK. This is an important fact to understand because it is the main factor that will determine the amount of taxes that he has to pay. When an individual starts to work outside the UK, he is considered a non-resident of the UK for tax purposes. This means that the UK authorities treat the income that is earned by the nonresident individual as coming from a different country and as such he is liable to pay the taxes corresponding to that country. On the other hand, if the individual works in the UK for a particular period of time then he is said to be a resident of the UK and this will be treated as his only source of income.
Self-Assessment Tax
The next step in the process of how self-assessment tax is calculated is the inclusion of all the income of the individual during the time of his employment. The income of an individual includes the basic salary that he receives from his employer. It also includes any bonuses that he receives and other payments that are made according to the performance of his job. The business activity of an individual also comes into play here. If the income of the business is more than the amount that is included in his personal income then the personal income will be taxed at a higher rate.
UK Tax Authorities
The next step in the process of how self-assessment tax is calculated is the assessment of his business liability. This refers to the sum of money that is owed by an individual to the UK tax authorities. The tax liability of a person can be established by looking at the total income that an individual brings into the UK and the tax that he pays on this income. This is basically the sum of money that an individual pays to the UK tax authorities every year in return for the privilege of being able to live in the country.
Capital Gains Tax
A further consideration that goes into the calculation of how self-assessment tax is calculated is the amount of deductions that one is eligible to make. These include any gifts that an individual may have received and any interest that he paid on loans that he had taken. These are considered necessary deductions and are therefore deductible from the total income that is earned by an individual. The same is true of the Capital Gains Tax that an individual may have to pay if he has benefited from the sale of some of his assets. The rate of this tax also depends on the earnings that the individual gets from any assets that he may have in his possession.
Individual as a Bankrupt
One of the major advantages of using the services of an accountant when one want to know how the self-assessment tax is calculated is the absence of any errors in the calculations. The use of these professionals enables the UK tax authorities to make the correct assessment of a person's tax liability. The tax offices cannot afford to make mistakes when the income of an individual is computed. After all, the accuracy of the computations is crucial in order to ensure compliance with tax laws and to prevent the declaration of an individual as a bankrupt.
Income Tax
It must also be remembered that even if one is not subjected to income tax because his work is providing a public service, he still will have to pay the income tax that he is liable to pay. Answering the question of how self-assessment tax is calculated is therefore very important in order to avoid paying too much income tax. This is especially the case if the person finds himself on the wrong side of the law by claiming bankruptcy. In the UK, it is the courts that determine how much tax an individual owes based on his gross salary and other related circumstances.
