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Income Tax in the UK for people earning below tax-free alloawance income

Income Tax in the UK for people earning below tax-free alloawance income

Old Jan 25th 2012, 6:36 pm
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Default Income Tax in the UK for people earning below tax-free alloawance income

Hi:

I have a question regarding taxes in the UK....Basically, my mother's income is below the current tax-free allowance rate of around 7K/year. When she contacted them two years ago, HMRC informed her she does not owe any taxes and hence does not have to file her tax for that year. Moreover, they informed her if they realize she does then they will contact her accordingly to file her taxes. However, I have recently heard that everyone is required to file taxes in the UK whether they owe any taxes or not...is this correct? When did this change? I would have assumed they would at least contact many citizens in writing who are not internet savvy.

Any feedback would be highly appreciated , thank you in advance

Manny
ps: Please shift my thread to appropriate location if this is not the correct place to ask this question, as I was unsure where to submit my question.
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Old Jan 26th 2012, 10:19 am
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Default Re: Income Tax in the UK for people earning below tax-free alloawance income

Originally Posted by manny1980 View Post
However, I have recently heard that everyone is required to file taxes in the UK whether they owe any taxes or not...is this correct? When did this change?
People who don't work, won't have to fill in tax returns and people who work and use the PAYE system, won't have to either I assume as their employers do that; but I have read recently where self employed people (or part earnings self employed) have filled in their tax returns even if they knew their tax liability was £0. I assume your mother is self employed?

If nobody on here can help you, perhaps try the 'cutting tax' forum on the moneysavingexpert site?
http://forums.moneysavingexpert.com/...splay.php?f=22

Last edited by formula; Jan 26th 2012 at 10:24 am.
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Old Jan 26th 2012, 1:04 pm
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Default Re: Income Tax in the UK for people earning below tax-free alloawance income

Originally Posted by formula View Post
People who don't work, won't have to fill in tax returns and people who work and use the PAYE system, won't have to either I assume as their employers do that; but I have read recently where self employed people (or part earnings self employed) have filled in their tax returns even if they knew their tax liability was £0. I assume your mother is self employed?

If nobody on here can help you, perhaps try the 'cutting tax' forum on the moneysavingexpert site?
http://forums.moneysavingexpert.com/...splay.php?f=22
Thank your for your reply and that link you provided! No, my mother is not even self-employed...she lives off on some pension and interest she earns from her savings in the bank but her total income from both is below the tax-free allowance. But since I heard that people who even if, as you stated above, have zero tax liability still have to fill their taxes was something new and I was not aware whether this is a new rule or always there. My mother gets worried in case she has done anything wrong and two years ago when HMRC informed her she doesn't have to file her taxes and they will contact her if she does but I just thought maybe there has been some change in law, hence wanted confirmation.
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Old Jan 26th 2012, 2:42 pm
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Default Re: Income Tax in the UK for people earning below tax-free alloawance income

The people on that site will know what she is meant to do and any new laws. I'm lazy; I'm PAYE.

As your mother's income is so low, has thought about claiming Pension Credits? At the moment, Pension Credits is based on income and not capital, so only the earned income from her savings will be counted in the estimate. She (or you can do it for her) can get a rough estimate to see if she able to get help, on the government site.
http://www.direct.gov.uk/en/Pensions...edit/DG_180167

Even if she is only given £1 each week Pension Credit, it is a passport benefit which means she will be allowed to have other things i.e. no council tax bill, free prescriptions.

Again, I know nothing about claiming Tax Credits, but that moneysaving link I gave above, will have people who do. Maybe one of the other boards on that site such as the 'Pensions, Annuities and Retirement Planning' or even the 'Over 50s Money Saving' for help on what else she is allowed. Forum members will direct you to the correct board if you post in the wrong area.

Last edited by formula; Jan 26th 2012 at 2:44 pm.
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Old Jan 26th 2012, 4:37 pm
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Default Re: Income Tax in the UK for people earning below tax-free alloawance income

Originally Posted by formula View Post
The people on that site will know what she is meant to do and any new laws. I'm lazy; I'm PAYE.

As your mother's income is so low, has thought about claiming Pension Credits? At the moment, Pension Credits is based on income and not capital, so only the earned income from her savings will be counted in the estimate. She (or you can do it for her) can get a rough estimate to see if she able to get help, on the government site.
http://www.direct.gov.uk/en/Pensions...edit/DG_180167

Even if she is only given £1 each week Pension Credit, it is a passport benefit which means she will be allowed to have other things i.e. no council tax bill, free prescriptions.

Again, I know nothing about claiming Tax Credits, but that moneysaving link I gave above, will have people who do. Maybe one of the other boards on that site such as the 'Pensions, Annuities and Retirement Planning' or even the 'Over 50s Money Saving' for help on what else she is allowed. Forum members will direct you to the correct board if you post in the wrong area.
Thanks Pal for your help. My mother was quite concern earlier but after I informed her what you said as well as from what I read on the forum link you mentioned, we both are relived that she didn't make any mistakes.

I will look into tax credits as I have not heard of this before but I doubt she would be eligible for that as she has savings the bank account where her income comes from the interest she earns on the capital (although because of recession its very poor, as you may already know).
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Old Jan 26th 2012, 5:56 pm
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Default Re: Income Tax in the UK for people earning below tax-free alloawance income

Originally Posted by manny1980 View Post
I will look into tax credits as I have not heard of this before but I doubt she would be eligible for that as she has savings the bank account where her income comes from the interest she earns on the capital (although because of recession its very poor, as you may already know).
The amount of her savings won't stop her getting Pension Credit, but the interest may. Pension Credit is worked out on her income from her capital. The interest from her capital is calculated by a set formula.

The following types of income are taken into account when calculating your Pension Credit:

<SNIP>

£1 a week for every £500 (or part of £500) of 'capital' you have over £10,000 - capital includes savings and investments, and property that's not your main home

The above quote plus the details of what income counts, is here:-
http://www.direct.gov.uk/en/Pensions...edit/DG_180168


Some people have posted that they called The Pension Service and they then sent someone around to their relatives house to help them see if they can get any financial help with Pension Credit.
This is The Pension Service contact details from the government website:-
http://www.direct.gov.uk/en/Dl1/Directories/DG_10011323

Edited to say: I forgot to ask if your mother is pension age as I assume Pension Credits is just for those of state pension age (guessing, as I don't know much about them).

Last edited by formula; Jan 26th 2012 at 6:14 pm.
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Old Jan 27th 2012, 1:17 pm
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Default Re: Income Tax in the UK for people earning below tax-free alloawance income

Submitting a Tax Return (Self Assessment) is usually only done by people who are self employed. Everyone else has their Tax and NI deducted at source (i.e directly from their pay-packet).

There are some people on PAYE who do have to submit the odd tax return.

Company Directors
Very high earners
Employees in receipt of certain benefits
People who owe tax but who can't have it deducted from PAYE
People who have recently returned from abroad
Pensioners on high earning

So it could well be the case that the Inland Revenue do ask your Mum to complete a tax return, but that doesn't necessarily mean that she will have any tax to pay. It's just the IR's way of checking whether or not she owes anything.

She may even get a rebate if she paid too much tax during her last year in the UK - however this is unlikely

Contact the Self Assessment Helpline, they will be able to let you know where you stand but don't panic and remember that Self Assessment is just a way of checking whether tax is due or not.
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Old Jan 29th 2012, 2:17 am
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Default Re: Income Tax in the UK for people earning below tax-free alloawance income

Thanks Formula and Clarity for your feedback.

It seems like I have so many tax concerns both regarding myself here and for my mother in the UK

After reading here and forum Formula suggested above, I realized my mother does not owe any taxes as she is unemployed and her income is below the tax-free allowance. She is close to the pension age but not completely there yet, hence is careful with her spending because of her limited income from the interest on her savings.
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Old Jan 30th 2012, 10:07 am
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Default Re: Income Tax in the UK for people earning below tax-free alloawance income

Please be aware that for people over a certain age, the tax-free allowance is higher than it is for you & I. It is £9940 for those over 65, £10090 for over 75.
You don't have to do tax returns if you haven't been sent one, unless you know you owe tax (maybe you rent out property or do private consultancy work?), or you know the HMRC owes you tax.
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