Tax Planning
The different types of tax
Income Tax on earnings, pensions and benefits
Income tax is paid on:
- wages if you're employed
- the profits from your business if you're self-employed
- your State Pension and any company or private pensions
- some benefits like Jobseeker's Allowance, Carer's Allowance, and Incapacity Benefit
- National Insurance contributions (NICs).
If you're an employee, your employer operates PAYE (Pay As You Earn) and deducts tax and NICs from your wages. If you're self-employed you'll be responsible for paying your own tax and NICs and filling in your Self Assessment tax return.
Income Tax on savings and investments
Income tax is also paid on income from savings and investments. This includes:
- bank and building society interest
- dividends from shares
- rents from any investment properties you own
Bank and building society interest and dividends are usually 'taxed at source' (meaning tax is deducted before they're paid to you).
- Tax on bank and building society accounts
- Tax on UK dividends
- Tax on rental income
Tax on certain types of transaction
Income tax is also paid when you buy or sell things or give them away, for example:
- Capital Gains Tax if you sell or give away assets
- Stamp Duty when you buy property or shares
- Inheritance Tax on your estate when you die, including some gifts made up to seven years beforehand
Tax on goods and services
Taxes are also paid on when goods and services are bought. There are various types of taxes that may have to be paid like:
- Value Added Tax (VAT) on many everyday purchases
- Fuel Duty on petrol, diesel and LPG
- Excise Duty on alcohol and tobacco
- General Betting Duty
Taxes like VAT and the duties on fuel, alcohol, tobacco and betting are charged at flat rates and are added to the price you pay for the goods or services.