A Look Into Issue of Tax Credits in the UK
People who have dealt with filing returns from time to time may not have a big problem with understanding the concept of tax credits.
Unlike deductibles which are expenses that are deducted from the income so that the overall liability towards the taxman is reduced, they are deductions that are made on the already calculated tax payable so as to arrive at the final liability to the taxman.
The first way in which the credits come about is when you deduct what you had already paid during the year.
For example, if the total amount of money that you are supposed to pay in the year comes to £2,000 and you had already paid £1,200, you will only be required to pay £800.
In this case, the tax credit will be the £1,200.
Here, the total amount that you would have paid in taxes would have stood at £2,000.
The other way in which the tax credit occurs is when it comes in the form of a tax-free personal allowance.
In the previous years, everyone in the UK was allowed a tax-free allowance (£6,475 for the past few years.
) however, that has changed and now that amount is only allowed for the people who are earning less than £100,000 per annum.
The amount of money that you would have paid on the tax-free allowance can be considered as a tax-relief.
Again, the government may choose to let you deduct a fixed sum, say £50, from the taxes that you were supposed to pay.
Applying for the Credit If you would like to make use of the credits, then it is advisable that you acquaint yourself thoroughly with the existing and the proposed tax laws.
This is because every year, the laws of the land change and you therefore need to keep abreast with the same.
If you have children, the government allows you to ask for tax credit so that you can reduce your tax liability.
Although this amount is usually small and may not help the average family much, it can help one during times of extreme financial distress.
Persons with disability are also allowed to make use of this feature in the laws if they are able to prove that they work for at least 16 hours every week, and that they are at least 16 years old.
This requirement is similar to what is required of those people who are 50 years old and above.
The issue of tax credit is a rather tricky one and it is quite impossible to deal with all the elements of the same in one article.
However, if you suspect that there is some money that you can deduct from what you owe the taxman, it is advisable that you approach a qualified tax consultant for further advice.
Unlike deductibles which are expenses that are deducted from the income so that the overall liability towards the taxman is reduced, they are deductions that are made on the already calculated tax payable so as to arrive at the final liability to the taxman.
The first way in which the credits come about is when you deduct what you had already paid during the year.
For example, if the total amount of money that you are supposed to pay in the year comes to £2,000 and you had already paid £1,200, you will only be required to pay £800.
In this case, the tax credit will be the £1,200.
Here, the total amount that you would have paid in taxes would have stood at £2,000.
The other way in which the tax credit occurs is when it comes in the form of a tax-free personal allowance.
In the previous years, everyone in the UK was allowed a tax-free allowance (£6,475 for the past few years.
) however, that has changed and now that amount is only allowed for the people who are earning less than £100,000 per annum.
The amount of money that you would have paid on the tax-free allowance can be considered as a tax-relief.
Again, the government may choose to let you deduct a fixed sum, say £50, from the taxes that you were supposed to pay.
Applying for the Credit If you would like to make use of the credits, then it is advisable that you acquaint yourself thoroughly with the existing and the proposed tax laws.
This is because every year, the laws of the land change and you therefore need to keep abreast with the same.
If you have children, the government allows you to ask for tax credit so that you can reduce your tax liability.
Although this amount is usually small and may not help the average family much, it can help one during times of extreme financial distress.
Persons with disability are also allowed to make use of this feature in the laws if they are able to prove that they work for at least 16 hours every week, and that they are at least 16 years old.
This requirement is similar to what is required of those people who are 50 years old and above.
The issue of tax credit is a rather tricky one and it is quite impossible to deal with all the elements of the same in one article.
However, if you suspect that there is some money that you can deduct from what you owe the taxman, it is advisable that you approach a qualified tax consultant for further advice.
