A lesson on Tax. · 10:19pm Aug 27th, 2021

Hey guys.

Some of you guys here may not know what tax is and how to pay it.

I'm sure most of us, if not all of us here know how to pay tax and what it is.

Let's begin.

Some of us here use:

PAYE(Pay As You Earn):

Most people pay Income Tax through PAYE. This is the system your employer or pension provider uses to take Income Tax and National Insurance contributions before they pay your wages or pension. Your tax code tells your employer how much to deduct.

Tax Code:

Your tax code can take account of taxable state benefits, so if you owe tax on them (for example for the State Pension) it's usually taken automatically from your other income.

If the State Pension is your only income, HM Revenue and Customs (HMRC) will write to you if you owe Income Tax. You may need to fill in a Self Assessment tax return.

You pay tax on things like:

Money you earn from employment.
Profits you make if you’re self-employed - including from services you sell through websites or apps.
Some state benefits.
Some grants, including the Self-Employment Income Support Scheme, the Small Business Grant Fund, the Retail, Hospitality and Leisure Grant Fund, the Coronavirus Job Retention Scheme and the Test and Trace Support Payment in England (or the Self-isolation Support Payment in Scotland and the Self-isolation Support Scheme in Wales).
Most pensions, including state pensions, company and personal pensions and retirement annuities use Rental Income (unless you’re a live-in landlord and get less than the rent a room limit).
Benefits you get from your job.
Income from a trust.
interest on savings over your savings allowance.

You do not pay tax on things like:

The first $1,000 of income from self-employment - this is your ‘trading allowance’
The first $1,000 of income from property you rent (unless you’re using the Rent a Room Scheme).
Income from tax-exempt accounts, like Individual Savings Accounts (ISAs) and National Savings Certificates.
Dividends from company shares under your dividends allowance.
some state benefits.
Premium bond or National Lottery wins.
Rent you get from a lodger in your house that’s below the rent a room limit.

If you only occasionally sell items or rent out property (for example through auction websites or short-term rental apps), check if you need to tell HMRC about this income.

The amount of tax you pay can also be reduced by tax reliefs if you qualify for them.

Self Assessment tax returns:

If your financial affairs are more complex (for example you’re self-employed or have a high income) you may pay Income Tax and National Insurance through Self Assessment. You’ll need to fill in a tax return every year.

You must also fill in a tax return if you earned more than either:

$1,000 from self-employment.
$2,500 from other untaxed income, for example from tips or renting out a property.
Contact the Income Tax helpline if your income from renting out a property was between $1,000 and $2,500.

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