Tax 2010 / 2011 For Dummies, UK Edition E-Book

Sarah Laing

• Herausgeber: John Wiley & Sons
• Kategorie: Ratgeber
• Sprache: Englisch

Seitenzahl: 469

Veröffentlichungsjahr: 2010

Beschreibung

Fully updated for the 2010/2011 tax year, this book takes the hassle out of tax

Although you can't escape tax, you can make it easier to deal with. Whether you want to work out the taxes on your own business, make tax-efficient investments or simply understand where your money's going, this plain-English guide has it all. Get to grips with the UK tax system and discover how to make potentially significant savings on your tax bill.

• Tax facts – get the low-down on tax essentials

• Tax through your ages – find out how to make the most tax-savvy decisions at every stage of your life

• Pensions and benefits – understand the ins and outs of taxes paid on pensions and state benefits

• Working for someone else – keep an eye on your pay packet and make the most of incentive schemes

• Working for yourself – learn how to manage your company's taxes, whether you're just starting out or are a veteran business-owner

Open the book and find:

• Advice on complying with self-assessment regulations

• Techniques for calculating how much income tax you owe

• Updates on the most tax-friendly investments for you and your children

• How to manage property tax, whether you're buying, selling or renting

• Ways to reduce inheritance tax

• The best way to pay VAT on your own business

• The tax benefits of becoming a limited company

• Day-to-day tax-saving techniques

"Tax 2010/2011 For Dummies is expertly written in plain, everyday language that makes a complicated subject easy to understand. It's simple to follow, and full of invaluable tax tips and reminders. Highly recommended for someone looking for a straightforward introduction to the world of tax."
—Mark McLaughlin, CTA (Fellow) ATT TEP, Chartered Tax Consultant, Author and Editor

Learn to:

• Understand your tax status and fulfil your legal obligations

• Calculate your business taxes

• Fill out a self-assessment form

• Make tax-efficient investments

Leseprobe

Tax 2010/2011 For Dummies®

Table of Contents

Introduction

About This Book

Conventions Used in This Book

What You’re Not to Read

Foolish Assumptions

How This Book Is Organised

Part I: Tax Facts

Part II: Tax Through Your Ages

Part III: Pensions and Benefits

Part IV: Working for Someone Else

Part V: Working for Yourself

Part VI: The Part of Tens

Icons Used in This Book

Where to Go from Here

Part I: Tax Facts

Chapter 1: Thinking About Tax

Looking at Types of Tax

Knowing How You Pay Taxes

Keeping Money in Your Pocket

Saving tax on savings

Giving money away

Investing in property

Receiving pensions and benefits

Chapter 2: Understanding the Legal Framework

Laying Down and Interpreting the Law

Laying down the law

Interpreting the law

Getting to Know HMRC

Seeing Who Is Liable for Tax

Establishing your residence

Ascertaining your domicile

Claiming Allowances and Relief

Knowing who can claim

Making the claim

Distinguishing between Avoidance and Evasion

Looking After Your Records

Chapter 3: Self Assessing

Knowing Who Does Self Assessment

Understanding the Process

Remembering the Important Dates

Paying Your Tax Bill

Paying your tax bill if you’re self-employed

Paying your tax bill on other sources of income

Paying Interest and Penalties

Understanding interest

Facing penalties

Making mistakes

Dealing with Enquiries

Going through the process

Negotiating a settlement

Knowing Your Rights

HMRC’s rights

Your rights

Finding Help

Chapter 4: Working Out How Much Income Tax Is Due

Going through the Calculation Steps

Adding up your income

Deducting allowances

Applying the tax rates and bands

Making final reductions

Doing the Maths

Part II: Tax Through Your Ages

Chapter 5: Supporting Children

Getting Money from the Government

Claiming Child Tax Credit

Receiving childcare support through Working Tax Credit

Benefiting from Child Benefit

Making the most of Child Trust Funds

Collecting foster care relief

Giving Money to Children

Giving to under-18s

Paying out to over-18s

Setting up a trust

Chapter 6: Making Tax-Efficient Investments

Receiving Tax-Free Income from Investments

Investing Tax-Efficiently

Looking at popular investments

Collecting valuables

Betting and racehorses

Investing on the stock market

Buying into unit trusts

Saving for school fees

Giving to Charities

Understanding Gift Aid

Making a claim through Gift Aid

Giving through your employer’s payroll

Paying Tax on Investment Income

Deducting tax from savings

Claiming back tax on savings

Taxing dividends

Dealing with capital gains tax (CGT)

Chapter 7: Investing in Property

Paying Taxes on Property

Stumping up for stamp duty

Forking out for council tax

Running a Property Income Business

Paying tax through self assessment

Understanding rental income

Deducting expenses

Claiming capital allowances

Relieving your losses

Letting Your Spare Room

Renting Out Holiday Homes and Overseas Properties

Letting out a holiday home in the UK

Looking at the tax advantages of UK holiday lettings

Receiving rent from property abroad

Dabbling in Property Development

Selling Up

Deciding which is your main residence

Avoiding capital gains tax

Chapter 8: Passing On Your Wealth

Adding Up What You’re Worth

Understanding your estate

Discounting your business assets

Knowing the tax rates

Making Gifts

Understanding the seven-year rule

Using your exemptions

Sharing with your spouse or civil partner

Giving with reservation

Turning Capital into an Income

Paying Inheritance Tax

Drawing Up a Will

Understanding the importance of a will

Setting up trusts

Making specific bequests

Changing your will

Part III: Pensions and Benefits

Chapter 9: Understanding UK Pensions

Understanding the Basics

Looking at State Pensions

Noting your entitlement

Figuring out when you reach retirement age

Obtaining a forecast

Deferring your state pension

Applying for Pension Credit

Thinking About Private and Occupational Pensions

Paying into a pension

Understanding occupational pensions

Topping up with extra payments

Buying an annuity to save tax

Taking your pension

Finding Further Help

Contacting HMRC

Talking about national insurance

Seeking other support

Chapter 10: Paying Tax on Your Pensions

Knowing What’s Taxable

Understanding the basics

Looking at tax-exempt pensions

Receiving a foreign pension

Establishing Your Allowances

Understanding the age-allowance trap

Escaping the tax trap

Paying Tax under PAYE

Paying tax on state pensions

Paying tax on occupational and private pensions

Paying tax on both state and occupational or private pensions

Paying tax on your retirement annuity

Chapter 11: Looking at State Benefits and Tax

Understanding State Benefits

Looking at entitlement to state benefits

Knowing which benefits are taxable

Paying Voluntary NICs

Working out who pays voluntary NICs

Deciding whether to top up your NICs

Paying for earlier years

Part IV: Working for Someone Else

Chapter 12: PAYEing Tax in Employment

Considering Your Employment Status

Knowing What You Pay Income Tax On

Paying Class 1 NICs

Knowing who pays Class 1 NICs

Looking at how much you pay

Contracting out

Reducing contributions for married women

Paying Class 1A and 1B NICs

Collecting NICs directly

Deferring payment of NICs

Understanding Your Employer’s Responsibilities

Deducting tax using your PAYE code

Issuing tax certificates

Checking Your Pay

Working out your take-home pay

Repaying a student loan

Noticing when your employer gets it wrong

Looking at Special PAYE Situations

Receiving Payments for Losing or Leaving Your Job

Being made redundant

Receiving pay in lieu of notice

Going to a new employer

Chapter 13: Receiving Expenses and Benefits

Taxing Expenses and Benefits

Explaining expenses and benefits

Examining the general tax rules

Travelling to and for Work

Counting the cost of a company car

Driving the work’s van

Going green and saving tax

Receiving Other Benefits

Claiming relocation expenses

Paying for childcare

Realising other tax-free perks

Special deals for special jobs

Chapter 14: Sharing Your Employer’s Fortunes

Introducing Share Schemes

Working out what’s on offer to whom

Adding up the tax savings

Listing the types of schemes

Saving with an SAYE Scheme

Understanding how SAYE works

Growing your money in an SAYE scheme

Cashing in your SAYE fund

Leaving the scheme early

Participating in Share Incentive Plans

Getting free shares

Going into partnership with your employer

Matching shares with your employer

Divvying up the dividends

Sharing Out the Options

Opting for a Company Share Option Plan

Enterprising investments

Going beyond Approval

Part V: Working for Yourself

Chapter 15: Starting a Business

Understanding the Terms

Sole traders

Partnerships

Limited liability partnership

Limited liability company

Qualifying for self-employed status

Establishing whether you’re trading

Formalising the Business

Registering your new business

Paying national insurance contributions

Registering for VAT

Charging VAT

Paying VAT

Choosing an Accountant

Getting Other Help

Chapter 16: Running a Business

Keeping Business Accounts

Getting to grips with record-keeping

Choosing your accounting date

Working Out Your Business’s Income Tax Bill

Adding up your income

Offsetting business expenses

Claiming capital allowances

Relieving your losses

Clarifying the classes

Avoiding overpayment

Contracting and Subcontracting in the Construction Industry

Examining contractors

Looking at subcontractors

Expanding Your Business

Taking on employees

Employing your family

Winding Up the Business

Choosing between closing down and selling up

Letting your employees know

Calculating your final tax liability

Deregistering for taxes

Chapter 17: Incorporating Your Business

Evaluating Incorporation

Looking at the disadvantages of the company route

Examining the upside of company status

Putting the options into practice

Deciding whether to incorporate

Making the Transition in Your Accounts

Forming a Limited Company

Understanding the legal framework

Drawing up the paperwork

Communicating with HMRC

Getting the family involved

Abiding by anti-avoidance legislation

Deciding How to Pay Yourself

Minimising the company’s corporation tax liability

Paying yourself out of the profits

Selling Your Company

Minimising your tax bill

Deciding what to sell

Selling your shares back to the company

Part VI: The Part of Tens

Chapter 18: Ten Tax-Saving Tips

Optimising Your Personal Allowance

Keeping an Eye on Age Allowances

Using Your Capital Gains Tax Exemptions

Tracking the Offsetting of Your Losses

Sharing the Wealth with Your Partner

Helping Your Kids Avoid Inheritance Tax

Claiming Household Expenses When You’re Self-Employed

Getting Your Employer to Cough Up for Home Expenses

Making the Most of Your Savings

Plumping Up Your Pension

Chapter 19: Ten Tips for Dealing with HM Revenue & Customs

Organising Your Paperwork

Keeping Hold of Records

Finding the Facts to Help You

Discussing Your Tax Affairs

Knowing Your Rights

Making a Complaint

Notifying Chargeability

Avoiding Enquiries

Staying on the Right Side of the Law

Finding Professional Advice

Chapter 20: Ten Tips for Starting and Running Your Own Business

Engaging an Accountant

Getting Free Advice

Registering As Self-Employed

Thinking about National Insurance

Registering with the VAT Man

Paying Your Tax Bill

Using Up Loss Relief

Becoming an Employer

Growing the Business

Thinking of Moving On

Appendix

Guides for planning ahead

Guides for pensioners

Claim forms

Non-taxable state benefit rates

Taxable state benefit rates

Tax 2010/2011 For Dummies®

by Sarah Laing

Tax 2010/2011 For Dummies®

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ISBN: 978-0-470-66255-7

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About the Author

Sarah Laing is a Chartered Tax Adviser and a member of the Chartered Institute of Taxation. She has been writing professionally since joining CCH Editions in 1998, as a senior technical editor, where she contributed to a range of highly regarded tax publications. She became Publishing Manager for the tax and accounting portfolio in 2001 and later went on to help run CCH’s conferences and courses business. She originally worked for the Inland Revenue in the Newbury and Swindon tax offices before moving out into practice in 1991. She has worked for both small and ‘Big 5’ firms, and now works as a freelance author providing technical writing services for the tax and accountancy profession. Sarah is the News Editor and a director of TaxationWeb Limited (www.taxationweb.co.uk) which provides free information and resources on UK taxes to taxpayers and professionals.

Author’s Acknowledgements

Although I’ve been writing about tax for many years, writing Tax For Dummies proved to be one of the greatest challenges I have faced. Tax affects us all and is undoubtedly one of the most complicated, yet most talked about, topics. I hope that you’ll find this book easy to navigate and more digestible than other reference material. The objective of this book is to provide an easy-to-use, straightforward commentary on many common tax issues and problems, with the emphasis on practical rather than theoretical points. Wherever possible, I have included references to other, additional sources of information.

I would like to thank everyone at Wiley for their hard work, patience, and dedication during the production of this book.

Thank you also to my husband, Nev, my children, James and Matthew, and to my parents, Averil and Vivian – your continual love and support is invaluable.

Finally, many thanks to you, the reader, for picking up and reading this book. Keep it close to hand and personalise it for your own use. Highlight relevant points and add notes in the margin. I hope that you find it useful.

Publisher’s Acknowledgements

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Introduction

As Scarlett O’Hara pointed out in Margaret Mitchell’s Gone with the Wind: ‘Death, taxes and childbirth! There’s never any convenient time for any of them.’ But inconvenient and unwelcome as tax is, you just can’t afford to be in the dark about this subject. Everyone needs to know about tax because paying the correct amount of tax when it’s due is compulsory. Failing to do so brings a range of penalties from a simple fine to a long spell in prison.

These days, avoiding having to deal with HM Revenue & Customs (HMRC) at some stage in your life is difficult. Two generations or so ago, only the minority of people paid tax. Most people earned their weekly cash wage packet and that was that. Now, practically no one escapes the taxman’s net. You can be a customer of the tax system as an employee, employer, self-employed worker, parent and consumer. You generally start paying income tax and national insurance as soon as you start work and some people carry on paying tax well beyond the grave. And many state benefits are now administered by HMRC, so if you are lower paid or out of work, you need to make contact with HMRC for any claims.

The UK tax system is complicated and ever-changing. However, one factor remains unaltered – we need taxes to pay for public services such as hospitals, schools, roads and fire and police services. Yet, we would all rather have more money in our own pocket to spend on our families and ourselves. Reading this book helps you to square this circle by using many legitimate ways to ensure that you pay the taxman the minimum amount possible, and not a penny more.

About This Book

Tax 2010/2011 For Dummies is designed to give you an understanding of the UK tax system and help you pay the right amount of tax for your situation. It contains many tax-saving tips to help you legally reduce your tax bill and plenty of warning points to help you avoid the pitfalls.

But Tax 2010/2011 For Dummies isn’t just about saving tax. In this book I show you how the system works and your role in it. I tell you where you can find more information, often at no cost. I give you hints and tips on how to deal with HM Revenue & Customs (HMRC) and provide guidance on how to file your own self-assessment tax return.

Conventions Used in This Book

To help you navigate through this book, I set up a few conventions:

Italics are used for emphasis and to highlight new words or defined terms.

Bold faced text indicates the key concept in a list.

Monofont is used for web and email addresses.

What You’re Not to Read

This book is primarily an action guide to dealing with your taxation affairs. The text in grey boxes throughout the book contains information that’s interesting but not essential. So, you can choose to read a sidebar if the topic appeals to you, but if you skip over it, you aren’t missing out on anything you really need to know.

Foolish Assumptions

While writing this book I made some assumptions about you:

You aren’t a tax professional. If you are, you have plenty of reference books and manuals to choose from and are far too experienced to be reading a basic guide to the tax system.

You don’t need hand-holding to fill in your annual self-assessment tax return. I don’t go through the self-assessment form step-by-step because the HMRC guidance that accompanies the tax return is very comprehensive and easy to follow. Instead, I offer tips that you can put to use beforehand so that you can fill in the form easily and quickly, and hopefully save some of your hard-earned cash.

You don’t want tax to be an all-consuming pastime. You want to know just enough to make sure that you pay the right amount and claim what you’re entitled to.

You want to know the pitfalls as well as the plus points when it comes to organising your finances to minimise tax. This applies particularly to investment choices, and deciding whether to give assets away to children and grandchildren.

You’re willing to seek professional advice if you’re unsure about anything. You don’t make financial decisions lightly, and if you need more info than I provide in the book, you’ll get some support from the professionals and organisations I suggest.

How This Book Is Organised

This book has six major parts, each on a different theme. Each part is divided into chapters relating to the theme, and each chapter is subdivided into individual sections relating to the chapter topic. Additionally, check out the table of contents at the start of this book and the detailed index at the end to help you pinpoint a specific area of interest.

Here’s an outline of what you can expect to find out about in each part.

Part I: Tax Facts

This part is essential for understanding the tax system in the UK. I take you through the legal framework and the internal workings of HM Revenue & Customs (HMRC). I help you get to grips with self assessment and what it means for you. I also tell you how to organise your paperwork and how to work out how much tax you owe.

Part II: Tax Through Your Ages

In this part, I look at how tax affects you in your personal life. I examine tax-efficient savings and investments and how to take advantage of the tax breaks on offer. I look at the tax implications of having kids and getting on the property ladder, and I also include a run through of inheritance tax issues that may affect your estate after your death.

Part III: Pensions and Benefits

This part tells you how to maximise your pension pot in the most tax-efficient way and explains the state retirement pension and surrounding tax issues. Then I look at other state benefits that HMRC administers, and outline which ones you can expect to receive if you’ve paid national insurance and which ones you have to pay tax on.

Part IV: Working for Someone Else

This part concentrates on being an employee, looking at the Pay As You Earn (PAYE) system in detail and telling you how to check your tax and national insurance payments. In addition, I guide you through which employment-related perks are taxable and which are tax free.

Part V: Working for Yourself

Working for yourself can be the best, or worst, thing you ever do. Getting organised and setting up properly for tax from the start hopefully helps to set you on the path to success. In this part I help you decide which business structure is best for you. I show you what you can claim for tax purposes and help you understand how your tax bill is calculated. Finally, I take you through the practicalities of turning a business into a limited company.

Part VI: The Part of Tens

This part is an essential ingredient in any For Dummies book. Each of the three chapters contains ten succinct, must-know points. In this part, I sum up tax-saving ideas and give you a rapid revision course on how to deal with HMRC. The final chapter gives a quick romp through the most important things to keep in mind when you run your own business.

Icons Used in This Book

Within each chapter you find the following icons pointing you to particular types of information that you may find immediately useful:

This icon contains true-to-life examples to help illustrate a point. These examples are designed to give you a better understanding of how to put the theory into practice, but if you already have a grasp of the topic, you can skip over them.

Keeping in mind the tips that this icon highlights can make your tax life easier.

The bull’s-eye highlights things you can do to minimise your tax bill and general advice on how best to arrange your tax affairs.

This icon marks pitfalls, traps and other things that you definitely shouldn’t do if you want to stay on the right side of HMRC.

Where you see this icon you know that the accompanying text is a little more complex. If you’re struggling to get to grips with the detail, feel free to move on.

Where to Go from Here

You can read this book in several ways. You can start at the front cover and read all the way through to the end. Reading the book this way gives you a good understanding of the UK tax system because it covers all the main taxes (income tax, capital gains tax, inheritance tax, corporation tax, stamp duty, VAT and national insurance).

Alternatively, you can pick a topic that interests you and go straight to it. This book is set up so you read the bits that interest you in self-contained sections. If you do want to skip about the book, I recommend that you read Part I first. This gives you a good foundation for understanding the whole taxation process. But of course, you can read it in any way you want – it’s your book.

Wherever you go from here, whenever you find a piece of advice or a warning that applies to you, copy it, and then fix it to the fridge with a magnet, or pin it up on your notice board, and then don’t forget to act on it. And as you read through this book, why not make pencil notes on your tax form to help you when you come to complete the form for real? Being informed and planning well ahead is the best tax advice anyone can give you.

Part I

Tax Facts

In this part . . .

Do you find the subject of taxation decidedly taxing? Does working out your tax bill leave you nursing a pounding headache? Never fear – this part is just for you and gently eases you into the basics of the UK tax system. Think of this part as the foundation stone on which you can build and broaden your knowledge – or the code-breaker that helps you understand the taxman’s gobbledegook.

In this part I tell you how the tax system works, what you have to do to keep on the right side of the law and how to make life easier for yourself by getting properly organised. I also explain the self-assessment system, so that you have a good understanding of how to complete the right forms, calculate your tax bill and pay anything you owe on the right date (so avoiding any nasty fines).