HMRC Income Tax Return Calculator

Hmrc Paying Income Tax Includes

A tax year runs from 6 April to 5 April of the subsequent year and the taxable income includes:

• Salary / take-home pay received from employer, including benefits in kind like company vehicle
• Self-employment income
• Income for personal, state and occupational pensions
• Benefits from social security
• Interest received on savings
• Income from dividends received / shares
• Income from rental
• Income received from a trust

There are certain exemptions or income from certain source that fall under the non-taxable bracket. Also, income tax liability does not have any age criteria. The only thing that matters is the income earned and if the income is below or above the taxable limit. For a taxable individual it is imperative, by law, to keep all the records of income and expenses that are claimed against tax. These records will be required if HMRC instructs to complete a tax return.

Income Tax Calculator

Income Tax Calculator

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Income Tax (£)

2017/18 2018/19

Net Income (£)

* Input digits (0 - 9)

Income Tax (£)

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Total Income Tax is calculated on the basis of Tax Bands. Below is the segregation of how you pay tax for each band-

Tax Free (£)

Basic Rate (£)

Higher Rate (£)

Additional Rate (£)

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* This calculator is only for reference purposes. For accurate and detailed report, please consult with an accountant. *

HMRC PAYING INCOME TAX

The following steps will give an overview of how the taxable income and income tax payable is computed. Since, the rules for income tax are complex DNS Accountants can help taxpayers with any tax issues they come across.

Step 1: Taxable income from all the sources, before tax, is added. For a fiscal year or financial year, this may include salary or take-home pay received or profit from self-employment, taxable social security benefits, rental income, interest on savings, and pensions. The non-taxable income is not included. This may comprise of pension credit, child tax credit, lottery winning, housing benefits, maternity allowance, working tax credit etc. This step will give a clear understanding of what is the total income for computing the payable tax.

Taxable income – Band

INCOME TAX RATES
	2018/19	Rate	2017/18	Rate
Individuals - UK
Starting rate	£1 - £5,000	20%	£1 - £5,000	20%
Basic rate	£5,001 - £34,500	20%	£5,001 - £33,500	20%
Higher rate	£34,501 - £150,000	40%	£33,501 - £150,000	40%
Additional rate	Over £150,000	45%	Over £150,000	45%
Individuals - Scottish income tax
Starter rate	£1 - £2,000	19%	N/A
Basic rate	£2,001 - £12,150	20%	£1 - £31,500	20%
Intermediate rate	£12,151 - £31,580	21%	N/A
Higher rate	£31,581 - £150,000	41%	£31,501 - £150,000	40%
Top/Additional rate	Over £150,000	46%	Over £150,000	45%
Trusts
Standard rate	£1 - 1,000	20%	£1 - 1,000	20%
Trust rate	Over £1,000	45%	Over £1,000	45%

National insurance contributions

While checking if the correct amount of tax has been deducted from the pay, it is also important to check if correct national insurance (NI) contributions have been deducted, so that the take-home pay amount is correct. NI contributions are computed on gross pay and it may vary for employees depending on the pension arrangements and income level.

For self-employed individuals, NI contributions have different rates, depending on the profits.

National Insurance contribution thresholds

NATIONAL INSURANCE CONTRIBUTIONS
Class 1
Employer		Employee
Earnings per week	Rate payable	Earnings per week	Rate payable
£0.01 - £162.00	Nil	£0.01 - £162.00	Nil
£162.01 - £892.00	13.8%	£162.01 - £892.00	12%
Over £892.00	13.8%	Over £892.00	2%
Class 1A and 1B (employers only)	13.8%
Class 2 (self employed)	£2.95 per week (small profits threshold £6,205)
Class 3 (voluntary)	£14.65 per week
Class 4 (self-employed)	Profits up to £8,424		0%
	Profits from £8,424 to £46,350		9%
	Profits above £46,350 per annum		2%

Step 2: Compute if there is any tax relief for the money spent during a financial year. The money spent can be towards pension scheme or paying employment expenses. Such expenses are taking out from the total income. For self employed individuals, business expenses are reduced to arrive at taxable profit

Step 3: HMRC Income Tax Personal Allowance – Verify the entitled tax free allowances. People living in the United Kingdom are permitted a basic personal allowance on a daily basis. Personal allowance is less for income greater than £100,000 and people born before 6 April 1948*, are entitled to a high personal allowance, while it might be limited depending on the income. People who are differently abled – blind individuals can get a Blind Person’s allowance. Deducting the allowances, tax is payable on the remaining income referred to as taxable income.

Income Tax Allowances
	2018/19	2017/18
Basic personal allowance	£11,850	£11,500
Married/civil partners allowance	£8,695	£8,445
Minimum married/civil partners allowance	£3,360	£3,260
Married/civil partners transferable allowance	£1,185	£1,150
Income limit	£28,900	£28,000
Blind persons allowance	£2,390	£2,320
Rent a room limit	£7,500	£7,500
Savings allowance	£1,000	£1,000
Trading income	£1,000	£1,000
Property income	£1,000	£1,000

Step 4: Payable tax for 2016 – 2017 can be computed based on an Example: If the taxable income is £11,000 after subtracting the personal allowance from total income, an individual does not have any taxable income above the basic rate limit of £32,000. Hence, the tax payable is £11,000 * 20% = £2,200

Step 5: To claim married couple’s allowance, an individual should be in a civil partnership or married, and either of the two should be born before 6 April 1935*. If this statement is valid, 10% of the married couple’s allowance is deducted from the payable tax

The above mentioned steps may not hold good if:

• an individual is self-employed and incurred a loss for the year
• an individual was born before 6 April 1948, and made charitable payments under Gift Aid and because of the level of income, age-related personal allowances are reduced
• an individual has an overseas income which is tax abroad

* In April 2013, the United Kingdom government cancelled all age-related personal allowance. During tax year 2015 – 2016 this was restricted to people born before 6 April 1948. However, this is same for everyone now due to increases in the basic Personal Allowance.

HMRC INCOME TAX ALLOWANCES

The amount of income tax paid each year depends upon:

• the amount of income above the personal allowance
• how much amounts falls in each tax band

Some income is tax-free and individuals don’t pay tax on:

• interest on savings from savings allowance
• income from Individual savings accounts (ISA), National savings certificates (tax-exempt accounts)
• the initial dividend amount of £5,000 from company shares, and others

Income Tax rates and bands

Band	Taxable Income	Tax Rate
Personal Allowance	Up to £11,850	0%
Basic Rate	£11,851 to £46,350	20%
Higher Rate	£46,351 to £150,000	40%
Additional Rate	over £150,000	45%