A Brief Introduction of UK Taxation System

UK government collects revenues mainly from: Income tax, National Insurance contributions, Value added tax (VAT), and Corporation tax. Income Tax An income tax is a tax that governments impose on income generated by individuals or entities i.e. wages, salaries, commissions, dividends, interests, rents etc. Income Tax year starts from 6 April and ends on 5 […]

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VAT margin schemes

VAT margin schemes tax the difference between what you paid for an item and what you sold it for, rather than the full selling price. You pay VAT at 16.67% (one-sixth) on the difference. You can choose to use a margin scheme when you sell: ● Second-hand goods ● Works of art ● Antiques ● Collectors’ items You […]

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Contractors – Tax Deductible Expenses as a – What You Can Claim

When you are a freelance contractor you will incur certain costs. Some of these can be claimed before taxes are applied – i.e. they are ‘tax deductible’. It is therefore important that as a contractor, you know what counts as a valid expense, so you can keep your tax bill as low as possible.The rule […]

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Contractors – PAYE and National Insurance

Income tax and National Insurance contributions, or NICs, are payable on the salary that you pay yourself out of your limited company’s turnover. It is common for contractors who are not caught by IR35 to pay themselves a very low salary (e.g. minimum wage) to keep income tax and NICs to a minimum, taking the […]

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Contractors – Tax on Dividends

Most contractors operating a limited company will pay themselves a mixture of a salary and dividends, as this allows them to make considerable tax savings. Dividends are payments made to the shareholders of a company – which, in the case of your limited company, generally means you alone.Dividends themselves are not tax-free; they qualify as […]

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Accounting and Taxation for Contractors

The Tax Liability of a contractor selling their services through a limited company falls into three areas: Corporation Tax; Tax Payable On Dividends; And PAYE/National Insurance. Corporation Tax The most important tax liability that applies to limited companies is Corporation Tax. This is a levy on your company’s profits, that is to say the money […]

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Penalties for Landlords

Reporting to HMRC When you start renting out property, you must tell HMRC and you may have to pay tax. If you don’t, you could be charged a penalty. You must report income from property rental if you receive:   £2,500 or more from property after deducting allowable expenses £10,000 or more from property before […]

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Self Assessment Tax Return Penalties

There are tax penalties for both late filing of Self-Assessment (SA) tax returns and for late payment of tax due under SA. The late filing penalty system changed for returns and payments from the 2010/11 year onwards.   A key feature of the new regime is that the late filing penalty is not reduced if […]

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Penalties for PAYE

As an employer, you normally have to operate PAYE as part of your payroll. PAYE is HM Revenue and Customs’ (HMRC) system to collect Income Tax and National Insurance from employment on or before your employees’ payday On or before your Employees’ Payday: Every time you pay your employees, use your payroll software to: Record […]

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Late Filing Penalties- VAT

You usually submit a VAT Return to HM Revenue and Customs (HMRC) every 3 months. This period of time is known as your ‘accounting period.’ The VAT Return records things for the accounting period like: your total sales and purchases the amount of VAT you owe the amount of VAT you can reclaim what your VAT refund from HMRC is You must submit a VAT Return even if you […]

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