swissmarg (swissmarg) wrote in sh_britglish,

Income Tax

How does income tax work in the UK?
* Do you have to submit paperwork once a year detailing your income and such? In the US this is called 'filing a tax return'. What is it called in the UK? Or is there some other procedure?
* What is the deadline for submitting your tax return?
* Is it usual for people to prepare their own tax returns? How complicated is it?
* I saw something on the government site about 'bands' as related to income tax. Are those like tax brackets in the US?
Tags: topic: money
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Most people don't (I didn't for the whole of my working life, so don't know the details). Mostly it is paid as "Pay As You Earn", "PAYE" for short, and deducted from one's salary through the employer. At the end of the tax year we get a form detailing how much has been paid. The amount varies according to tax code, but again I'm afraid I never paid close attention to the details, except that most people pay the "Basic" rate.
Thanks, I had no idea it was so easy.
I've never had to fill out a UK tax form; I've always been on PAYE through my workplace. My sister does have to do her own tax returns because she's effectively self-employed. I think she does it online, but I don't know how complex it is.
Thanks, it sounds like taxes in the UK are pretty easy then, for regular employees.
As sollersuk and sushidog have mentioned, most people don't fill in a tax return (same name as in the US); in general, if you financial affairs are simple, and you're paid by en employer, the tax is worked out by your employer and taken at source (ie, before you get your pay, a system known as Pay As You Earn, PAYE). Your employer provides you with a summary of your salary and tax payments for the year in the form of a P60.

If you have more complicated financial affairs, you may be required to fill in a tax return; that may be if you have multiple sources of significant income, if you're self-employed, maybe if you receive benefits in kind, etc.

There's a whole series of deadlines, but the tax return itself has be submitted by 31st October (for paper returns) or 31st January (online) for the preceding tax year (the tax year runs from 6th April - 5th Arpil).

Many people do their own tax returns, but some people employ an accountant to help - particularly if they run their own company.

Yes, the tax bands are more commonly known here as tax brackets, so I assume they're the same.

There's some more useful information at www[dot]gov[dot]uk/self-assessment-tax-returns/overview.


January 13 2016, 10:39:58 UTC 1 year ago Edited:  January 13 2016, 10:41:03 UTC

That's super helpful. I'm thinking specifically of John's situation, so I guess he would have to fill in some extra paperwork because he doesn't have a steady job... or at least he is earning some kind of exceptional income from Sherlock's cases (one assumes).

In the case of self-employment, how easy would it be for Sherock, for example, to cheat on his tax return? Are all tax returns looked at and checked against receipts, or are there just spot-check audits?
I filled in tax returns for a couple of years when I did a bit of consulting work (and was able to go back to PAYE afterwards, which was a relief!) and wasn't audited. I think it's random, or possibly if you do it online the filing software might spot anomalies, but that's a guess.

I was a bit worried about it, but it was fairly easy to do- not nearly as complicated as US ones sound! I think this is partly because there aren't nearly as many "deductions" to keep track of, eg, no tax deduction for having children, you get paid child benefit separately.

If Sherlock has money he wants to hide, I'm sure an accountant could help him legally or demi-legally shuffle it around. Wwe have people who use offshore havens and so on.

(If you want Sherlock to get himself into a huge frazzle, you could have him getting his National Insurance rate wrong- either for himself, or if he employs John- or dealing with Value Added Tax. Small businesses need to decide whether it's worth registering themselves for VAT (so they can reclaim the VAT they've paid on supplies), and if they do it sounds like a headache and a half. I don't know much about either of these so just offering them as search words if you want to add complications.)


January 12 2016, 23:02:15 UTC 1 year ago Edited:  January 12 2016, 23:06:40 UTC

PAYE is, hopefully obviously, deducted from each pay packet as you progress through the year, and this leads to some issues if you switch or start a job midway through the year, or your salary increases (or decreases) enough to push you into a different tax band. Usually you end up overpaying and getting it back after your P60 statement of taxable earnings has been issued in April (or May...) and someone spots the overpayment. Sometimes this requires an actual claim request to the Inland Revenue. You can claim back overpaid tax for some previous years if you have forgotten to do so previously. is an online calculator that can show how the various tax bands and deductions work out in real terms, if you play with it a bit. It shows the amounts payable in each band, and the tax-free allowances. Try it at 27Kpa [national average salary], 80Kpa, and 180Kpa, for instance.
Great, thank you!
Bands are what % of your income will be taxed, for earnings above the lower band.
So roughly, the first £4,000 you earn each year is untaxed, then the amount between £10,001 and £15,000 was taxed at 10% until abolished and possibly re-instated recently, then about 24% up to around £38,000, then 40% above that to about £100,000, and 50% thereafter is income tax.

Many other tax rates are 40%, for shares, capital gains, other types of 'unearned' income like redundancy payments above the first £30k...

If you have your own business you would get an accountant to do your tax return more to ensure deniability if it goes wrong and to save a bit of time, but many people with a bit of self-employment do their own - the worst part is just registering on the systems and then figuring out where to put your numbers, so after the first year, it's really pretty easy. We don't have the complex web of deductions against tax that the US has, with the exception of VAT for 'legitimate business expenses' - you can reclaim 20% on various items that were for the use of your company.

You have to file for the year 2014-15 by end Jan 2016. However best to do it as soon as you know the numbers won't change, as the HMRC helplines are pretty helpful until early December... unlike most Government services, you call up, speak to a human within a couple minutes, and they kindly explain how to pay them money (or if you don't need to). They are actually equally good in January, just with hours on hold first...
Thanks for the info. I feel like Sherlock would not have an accountant handle it, mainly because he'd never be able to provide all the necessary receipts. Maybe Mycroft would intervene and take care of it for him. Can you imagine Sherlock calling up a helpline for assistance? :-0
Mycroft would almost certainly take care of it, probably by having somoene else paid handsomely to do so, but in fact receipts aren't strictly necessary - if the accountant gets copies of Sherlock's bank statement with amounts incoming, he can just get taxed on that. It's only if he starts wanting to reclaim VAT that he would have to provide plausible evidence if audited of what his expenses were - and again most of that would be on his bank statement: "FGW Train Ticket £292.80" etc. As long as he withdrew cash for his more dodgy dealings (paying people), and didn't try claiming his flat was an office and thus a proportion of bills should be tax-exempt, it could be remarkably simple.

If he wanted to be a smart-arse (if?!) then he might try claiming for a zillion items that could be theoretically related to his business - there's many cases in the news about people trying it on, claiming dry cleaning/new clothes/shoes/season tickets should all be refundable or tax exempt, and ending up in court. Most fail but a few are successful (usually followed by a loophole being tightened).

John is almost certainly paid via an agency that supplies locums to GP practices or hospitals, so unless he worked a certain amount one year and much less the next year (so could claim tax back), would have no need for forms - in that situation you call/write to HMRC after the following April and they send you a cheque. Sometimes even happens automatically!

Mrs Hudson, however, will be renting part of her house at more than the tax-exempt level, so should be doing a tax return each year.
That's incredibly helpful, thank you. :)