Income tax

If you pay tax on your earnings or pensions through Pay As You Earn (PAYE), your employer or pension provider will deduct tax on behalf of HM Revenue & Customs (HMRC). In this case, you won’t usually need to complete a tax return.

If you have more complicated tax affairs, you may need to complete a self assessment tax return. You will always need to complete a tax return if you are self-employed, a company director or a trustee, or if you have foreign income. Such returns are completed by around nine million people in the UK each year.

Under self assessment, you or your accountant completes an online or paper tax return to tell HMRC about your income and capital gains or to claim tax allowances or reliefs against your tax bill. HMRC uses the figures on the tax return to work out your tax bill, or you or your accountant can work it out yourself.

How to pay: If you receive a tax return (or notice to file if you file online) by previous 31 October, you must pay HMRC the balance of any tax you owe by the following 31 January.

This is also the date by which you may be asked to make any first “payment on account” (a payment made during the year based on tax owed for the previous tax year) for the current tax year.  If you are due to make payments on account, the deadline for making a second payment on account is 31 July.

If you received your tax return or notice to file after 31 October, you must complete and return it to HMRC within three months of receipt. As a rule you then have 30 days from the date on the request for payment. If your payments, including payment for penalties, are late you will be charged interest.

Seeking professional advice is a wise step to ensuring that your financial affairs are as tax-efficient as possible.

There are numerous ways to pay income tax owed to HMRC, including Bacs, cheque, debit card or credit card, direct debit and internet banking.

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