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Personal Tax Return
Do I have to file Self-Assessment tax Return?
You must file your Self Assessment tax return online if :
- You were self-employed as a ‘Sole Trader’ and earned more than £1,000
- You were a partner in a business partnership
- You had a total taxable income of more than £150,000
- You had to pay Capital Gains Tax when you sold or ‘disposed of’ something that increased in value
- You had to pay the High Income Child Benefit Charge
- You may also need to send a tax return if you have any untaxed income, such as: money from renting out a property, tips and commission. income from savings, investments and dividends foreign income
How much TAX do I have to pay?
The amount of income tax that you have to pay depends on your level of income. In the UK, you do not have to pay any taxes if your income falls within £12,570 in a tax year. For income exceeding £12,570, the tax rate changes incrementally. The rate of tax for income ranging from £12,571 to £50,270 is known as the basic tax rate. The basic tax rate is 20%.
Tax Rate 2024-25:
Brand
Personal Allowance
Basic Rate
Higher Rate
Additional Rate
Taxable income
Up to £12,570
£12,571 to £50,270
£50,271 to £125,140
Over £125.140
Tax rate
0%
20%
40%
45%
What is Personal Allowance?
The personal Allowance is the amount of tax-free income you can have in a year. It depends on your age; and can be affected by the level of your income. The amount of this ‘personal allowance’ is set for each tax year. For the tax year 2024-25 the basic personal allowance is £12,570 (the same as 2023/24).
What happens when my Income goes over £100k?
Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above.
You’ll also need to do a Self-Assessment tax return if your adjusted net income is above £150,000. If you do not usually send a tax return, you need to register by 5 October following the tax year you had the income.
Do I have to pay National Insurance?
If your profits are £6,725 or more a year, Class 2 contributions are treated as having been paid to protect your National Insurance record. This means you do not have to pay Class 2 contributions.
If your profits are more than £12,570 a year, you must pay Class 4 contributions.
For tax year 2024 to 2025 you’ll pay:
- 6% on profits of £12,570 up to £50,270
- 2% on profits over £50,270
If your profits are less than £6,725 a year, you do not have to pay anything but you can choose to pay voluntary Class 2 contributions.
The Class 2 rate for tax year 2024 to 2025 is £3.45 a week.
Class 4: 6% on profits between £12,570 and £50,270 2% on profits over £50,270
How to pay?
Most people pay Class 2 and Class 4 National Insurance through Self Assessment. You must tell HM Revenue and Customs (HMRC) when you become self-employed as a sole trader or as a partnership.
Special rules for specific jobs:
Some self-employed people do not pay National Insurance through Self Assessment, but may want to pay voluntary contributions. These are:
- Examiners, moderators, invigilators and people who set exam questions
- Ministers of religion who do not receive a salary or stipend
- People who make investments for themselves or others - but not as a business and without getting a fee or commission
Class 2
£3.45 a week
Class 4
9% on profits between £12,570 and £50,270 2% on profits over £50,270
What expenses can I claim as Self Employed?
If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they’re allowable expenses. Costs you can claim as allowable expenses
- Office costs, for example stationery or phone bills
- Travel costs, for example fuel, parking, train or bus fares
- Clothing expenses, for example uniforms
- Staff costs, for example salaries or subcontractor costs
- Things you buy to sell on, for example stock or raw materials
- Financial costs, for example insurance or bank charges
- Costs of your business premises, for example heating, lighting, business rates
- Advertising or marketing, for example website costs
- Training courses related to your business, for example refresher courses
- You cannot claim expenses if you use your £1,000 tax-free ‘trading allowance’.
What are the Simplified Expenses? Who can use them?
Simplified expenses are a way of calculating some of your business expenses at flat rates instead of working out the actual costs. It is used to claim tax relief on business expenses when calculating the actual business costs is not feasible.
Simplified expenses can be used by:
- Sole traders.
- Business partnerships that have no companies as partners.
The types of expenses on which flat rates can be used are:
- Business costs for some vehicles
- Working from home
- Living in your business premises
Do I have to pay Tax on Child Benefit?
From 6 April 2024, child benefit is effectively withdrawn at a rate of 1% for each £200 earned over £60,000 a year by the higher-income partner. Therefore, the benefit is fully withdrawn where income of the higher-income partner reaches £80,000 a year.
Under these rules, it is possible for the charge to apply where your household income is just £60,200 (in the case where only one partner has any income) whereas it is also possible for your household income to be as high as £120,000 and for the charge not to apply (if, for example, each partner had income of £60,000).
What is Gift Aid?
Donating through Gift Aid means charities and community amateur sports clubs (CASCs) can claim an extra 25p for every £1 you give. It will not cost you any extra.
Can I get tax relief on Gift Aid?
If you’re a higher-rate taxpayer, you can claim back the difference between the tax you’ve paid on the donation and what the charity got back when you fill in your Self-Assessment tax return. It’s the same if you live in Scotland. Do this either:
- Through your Self-Assessment tax return.
- By contacting HM Revenue and Customs (HMRC) and asking them to amend your tax code.
What is Dividend?
A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns profit, any amount that is not re-invested into the business is distributed among its shareholders proportionately.
Can I get dividend allowance?
You have to pay tax on any dividend income above the dividend allowance.
Tax Year
6 April 2024 to 5 April 2025
6 April 2023 to 5 April 2024
6 April 2022 to 5 April 2023
6 April 2021 to 5 April 2022
6 April 2020 to 5 April 2021
Dividend Allowance
£500
£1000
£2000
£2000
£2000
How much tax to pay on Dividend income?
How much tax you pay on dividends above the dividend allowance depends on your Income Tax band.
Tax Band
Tax rate on dividends over the allowance
Basic Rate
8.75%
Higher rate
33.75%
Additional rate
39.35%
To work out your tax band, add your total dividend income to your other income. You may pay tax at more than one rate.
Example
You get £3,000 in dividends and earn £29,570 in wages in the 2022 to 2023 tax year.
This gives you a total income of £32,570.
You have a Personal Allowance of £12,570. Take this off your total income to leave a taxable income of £20,000. This is in the basic rate tax band, so you would pay
- 20% tax on £17,000 of wages
- No tax on £2,000 of dividends, because of the dividend allowance
- 8.75% tax on £1,000 of dividends
Capital Gains Tax:
Capital Gains Tax is a tax on the profit when you sell an asset that’s increased in value. Only the gain that you make is taxed and not the amount that you receive. You might also be subject to capital gain tax if you-
- Give it away as a gift
- Swap it for something else
- Get compensation for it
Some assets are tax-free. If your gains in a year fall within the tax-free allowance of £3,000 (2024-25) you do not have to pay Capital Gains Tax.
How much is the Capital Gain Tax Rate?
It depends on which tax band you were in for the relevant tax year.
- If you capital gain amount is within the basic Income Tax band, you’ll pay 10% on your gains (or 18% on residential property and carried interest.
- If you’re a higher or additional rate taxpayer you’ll pay:
- 24% on your gains from residential property
- 28% on your gains from ‘carried interest’ if you manage an investment fund
- 20% on your gains from other chargeable assets
What is Capital Gain Allowance?
You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount). Most individuals who are resident in the UK are allowed to have this Capital Gain Exemption. It is also sometimes referred to as the annual exemption.
| Tax Year | Annual Exemption Amount |
|---|---|
| 2024-25 | £3,000 |
| 2023-24 | £6,000 |
| 200-23 | £12.300 |
What is Remittance Basis?
The remittance basis is an alternate tax treatment available to individuals who are resident but not domiciled in the UK. You will be considered domicile if you were born in the UK with a UK domicile of origin and UK resident in the tax year 2020 to 2021, or you have been a UK resident for at least 15 of the previous 20 tax years and UK resident in 2020 to 2021 tax year.
If you’re taxable on the remittance basis, you’re liable to UK tax in the usual way on your UK sourced income and gains. But you’re only liable to UK tax on any remittances of foreign income and gains that you remit to the UK. If you choose to be taxed on the remittance basis you have to include these remittances on your tax return.
Do I qualify for Remittance Basis?
You must meet the following 3 conditions to qualify-
- You must be UK Residence of Tax Purpose
- You must be classified as UK Non-domiciled.
- You have foreign income or gain.
What are the drawbacks of remittance basis of taxation?
- You will lose your personal allowance and capital gain tax exemption.
- You will also lose foreign tax credit.
- You might end up with pay remittance basis charge of 30k or 60k if you have UK resident for at least 7 years of the previous 9 tax years or at least 12 years of the previous 14 tax years respectively.
What is Double Taxation Agreement?
Double taxation refers to instances when two or more countries impose a tax on the same income, asset, or financial transaction. Double Taxation Agreements are tax treaties between countries to avoid or mitigate double taxation. Such treaties may cover all sorts of taxes, ranging from income taxes to value-added taxes.
The UK has DTAs with more than 130 countries. If you are a UK tax resident earning foreign income:
- You will have to pay taxes twice on your foreign-sourced income if the source country does not have a DTA with the UK
- You can claim back the foreign income tax as tax relief if the source country has a DTA with the UK
If you are not a UK tax resident but earn income from the UK:
- You will have to pay tax on your income earned in the UK only
- You can claim back tax paid in the UK on your income in the other country as tax relief if it has a DTA with the UK
Seek Professional Advice
We get it—personal tax returns can feel overwhelming, especially with all the different sources of income and potential tax liabilities to consider. The good news? You don’t have to tackle it alone.
At Tx Accountants Ltd, we act as your partners in navigating the tax maze. Our goal is simple: to help you minimize your tax liability while staying compliant with HMRC regulations. Whether you’re self-employed, earning dividends, or managing capital gains, we’re here to guide you toward the most tax-efficient solutions tailored just for you.
Choosing us means more than just getting your taxes done; it means having a team that genuinely cares about your financial well-being. We’ll work closely with you to ensure you keep more of what you earn while aligning with your financial goals.
Let’s take the stress out of your taxes together! Reach out to us at info@txaccountants.co.uk for a friendly chat about how we can help you save money and make the most of your hard-earned income. Plus, don’t forget to ask about our free consultation!
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Farhad Kabir
MSc AFA MIPA FCCA
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