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The British tax system is one of the most complicated systems globally. Therefore, many individuals and organisations with a complicated tax structure often seek the services of experienced chartered accountants and business advisors in the UK to help them with their financial matters & tax Filing. If you’re currently living and working in the UK or taking UK retirement, you’re required to pay taxes.
However, the amount of tax you must pay will differ depending on your tax residency status and personal circumstances. HM Revenue and Customs (HRMC) is the body responsible for tax collection in the UK. Basic taxes include income tax, VAT, inheritance tax, CGT and property taxes.
The system is progressive, which means that the higher-income class pays a higher tax rate. Let’s have an in-depth look into UK taxes, self-assessment tax filing and why you need a chartered tax adviser for your taxation issues.
Types of Taxes in the UK
You may be required to pay taxes to at least three different levels of the government. One is the federal government; the other is devolved governments, and the last one is to local governments which collect taxes in the form of council taxes. HRMC is responsible for federal tax collection and typically collects the following central taxes:
Income Tax
Inheritance Tax
CGT
Property Tax
Corporation Tax
Land, Stamp Duty
VAT
Excise Custom Duties
Environmental Taxes
As mentioned, the local government is responsible for council tax collection. They are also responsible for enforcing a limited number of fees and charges, such as street parking fees.
Who is Required to Pay Taxes?
Anyone living and working in the UK must pay taxes to the government. However, the amount varies depending on various factors such as your tax residency status, domicile, salary bracket and much more. To calculate your taxable income, you need to add all your income and benefits, deduct your allowance and apply the appropriate tax rate on the difference.
or the 2024/25 tax year, the personal allowance stands at £12,570. This means that any income below this threshold is considered tax free. It is important to note that personal allowances and tax thresholds are updated annually. So you should always verify the latest rates to avoid missing out on your allowances.
More than 30 million people pay taxes in the UK each year. The UK doesn’t allow joint tax filing, as each individual must file their return.
Tax Rates in the UK
As mentioned, income tax rates are progressive in the UK. Higher-income is taxed at a higher rate. Tax is charged in all income earned from various sources that are subtracted from deductions and allowances. The personal tax allowance stands at £12,570; however, there is no personal allowance on incomes over £125,000.
If you earn anything less than £12,570, you are not required to pay any income tax. The tax rate in the £12,571 – 50,270 income bracket is 20%. Anything over £50,271 up to 150,000 is charged a tax rate of 40%, and if your income is more than £150,001 per year, you’d be required to pay a tax at the rate of 45%.
UK residents can enjoy tax-free allowances for savings interests and dividends. Moreover, you’d not be required to pay any tax on the first £1,000 you earn from self-employment and the first £1,000 of any rental income.
2024/25 Update: The personal allowance and higher rate tax thresholds will remain frozen until 2031, meaning no adjustments will be made to these thresholds during this period. This could impact your tax planning and calculations in the years to come.
Filing Your Tax Return
Filing your tax return is not as easy as it looks, and it is always recommended to get the help of chartered tax advisers & accountants for your tax returns as they can minimise the amount of tax you have to pay to HMRC. If you’re filing for a self-assessment tax return for the first time, you’ll need to register with the HM Revenue and Customs.
There is an option of registering online with the organisation. They will ask you for your employment status, and you can choose between self-employed, partnership or not self-employed. The process varies with the option that is being chosen.
As soon as you register for self-assessment, you’ll be issued a unique taxpayer reference (UTR) number. Please keep it handy as you’ll be required to use it when filing your returns. If you want to submit your tax return online, you need to set up a government gateway account. Once you’ve set up an account, you’ll get the relevant activation code in your email, complete the setup.
As of 2024, Making Tax Digital (MTD) will expand to include sole traders and landlords who earn over £20,000 in income. This means that you may be required to file your self assessment return using HMRC approved software. Be sure to check whether you need to comply with these new requirements.
According to the HMRC, the whole process can take up to 20 days, so make sure you start nice and early and don’t leave everything to the last minute. Any delays in the tax filing process can result in hefty fines and penalties.
Why Choose an Accountant for Self-Assessment?
Doing taxes might not be your strongest suit, especially if you own a small business or have a complicated tax structure. Therefore, it is always beneficial to hire a chartered tax adviser or an experienced tax accountant who can guide you in filing your tax returns.
Self-assessment tax returns must be completed once a year, and it indicates how much taxable income you’ve earned during the year and lists any deductibles or expenses that you may be able to claim.
A chartered accountant specialising in tax can help you with all your complex tax needs. They will help you navigate through the complexities and help you legally maximise the reliefs you are eligible to claim, and ensures that the whole process is efficient and smooth.
One of the most significant benefits of hiring a professional accountant for your tax returns is that it will minimise the errors in your filings. You’ll have a thousand other things to worry about as a small business owner, and tax filing will only add more pressure. Doing taxes requires undivided attention and focus. You’re bound to make mistakes on your returns if you’re multi-tasking it.
Errors can trigger HMRC audits which can be quite time consuming and stressful. Getting an accountant to do your tax returns will ensure no errors on your tax returns. The last thing you want is a tax audit, and hiring an accountant minimises the chances of that happening.
Self assessment Tax Return
Planning Ahead for 2025/26
As we look ahead. It is important to consider changes announced in the Autumn Budget 2025 that could impact your tax filings and financial planning for 2025 and beyond. Key changes include:
Income Tax Thresholds Frozen
The personal allowance (£12,570) and higher rate tax threshold (£50,270) will remain frozen until 2031. So it is important to plan for the potential effects on your tax liability.
Capital Allowances
New 40% first year allowances for main rate assets will be introduce from January 2026. So consider this when making investments for your business.
Late Filing Penalties
Starting 1 April 2026. Late filing penalties will double. Making it even more important to file on time to avoid additional costs.
Making Tax Digital
Starting in 2024 Making Tax Digital (MTD) will apply to sole traders and landlords earning over £20k. If you fall into this category make sure you are prepared to file your tax digitally.
Property & Savings Tax Rates
Tax rates on savings & property income are set to increase in 2027. So start planning your finances now to take benefits of any tax reliefs before the changes hit you.
By taking a closer look at your finances now, you can avoid any unexpected surprises down the road and make sure you are in a strong position to take advantage of any tax breaks before they change.
Reminder for Early Preparation
To stay ahead of any changes in the tax landscape, make sure to regularly review your tax strategy. Consult with your accountant and stay updated on HMRC guidelines. Early preparation and good tax planning can help you minimise tax liability and unnecessary penalties in the future.
Contact IBISS & CO Accountants
Looking for professional assistance with your tax returns? At IBISS & CO., we have a team of expert tax advisors who can help you through the complexities of tax filing. Whether you are self employed a landlord or a business owner. Our Self assessment accountants can help you navigate the self assessment process and make sure compliance with HMRC regulations.
Contact us today for a free consultation and start planning for a stress free tax filing season.
Final Thoughts
Tax filing in the UK can be a daunting process. Especially if you are not familiar with the system. However with the right guidance and preparation. It does not have to be overwhelming. By following the steps outline in this guide and with professional help when needed. You can ensure that your tax return is filed accurately and on time while minimising the risk of penalties.
