Tax Rebates & Refunds

A brief guide to income tax and tax rebates

February 23, 2011
Posted in Income Tax — Written by Jennifer

Paying income tax and filing for returns can be extremely confusing. This is mainly because of the paperwork that is involved.

What amount will be considered as your taxable income?

The taxable income includes earnings from self employment, state, company or personal pensions, income from dividends, amount earned from a trust or an organisation and interest earned on savings. If your income consists of any of the above mentioned sources, it is important to pay income tax on this money.

Non-taxable income

Benefits, tax exempt accounts, WTC (Working Tax Credits) and premium bond wins are some of the sources of income that are not taxed. It is important to segregate the taxable income from the non-taxable ones.

Tax free allowance

If you are a resident in the United Kingdom, you will receive a ‘Personal Allowance’. This is the amount that you will receive each year tax free. The basic tax free amount for the (2010-11) financial year is £6,475. It should be noted that you are entitled to a higher amount if you are above 65 years of age. Similarly, if you are disabled, you are entitled to a tax free disabled persons allowance.

How is income tax collected?

Income tax is collected in many different ways depending on the type of income. This includes PAYE (Pay As You Earn), One off payments and Self Assessments credits. It is important to file for returns whether you are employed, self employed or not working.

It is important to note that paying taxes regularly will help you when applying for loans or mortgages as it improves your credit ratings.

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