Do I need personal tax advice?

Good tax advice can deliver a significant improvement in your take-home income, reduce the risk of making errors on your tax return and make your finances much more predictable over the long term.

As an individual, there are several ways in which you may have to pay tax: on your income, on investment growth and some savings interest, as well as on assets you inherit.

Whether you have to pay tax, and how much, can depend on a number of circumstances, so it isn’t always easy to work out what you owe.

This means running the risk of either paying too little (and potentially getting into trouble with HMRC) or paying too much and losing the money you need.

Unless your tax affairs are very simple, it can be very useful to have an accountant to help you calculate your personal tax bill and also find ways to reduce it.

This guide offers answers to the most popular personal tax questions.

When do I need to pay my tax bill?

You must pay any tax you owe by midnight on 31 October if you’re completing a paper tax return.

The next deadline for online tax returns is midnight on 31 January 2025. 

So, if you are paying tax for the 2023/24 tax year, you must have paid it by midnight on 31 January 2025. 

What is personal tax planning?

HMRC says it wants people to pay 'the right amount of tax', and you should want this too.

Many people end up paying more tax than they need to as they are unaware of their allowances and the various legal methods they can use to reduce their tax bill.

Tax planning lets you see exactly where you are paying tax and whether you are paying too much.

You can track how much tax you've paid (and whether you still owe tax or have money owed to you) via your personal tax account on the government's website. 

What's the difference between tax planning and tax avoidance?

Tax planning is the process of organising your finances so you don't pay more tax than is necessary. 

For example, it means keeping track of your allowances, tax-deductible expenses, charitable donations and business losses while being aware of how to cut your tax bill using pensions and individual savings accounts (ISAs).

Tax avoidance, on the other hand, typically involves reducing your tax bill by some form of investment scheme. Many schemes are legal, and others appear to be legal from a technical point of view.

However, if HMRC concludes the sole purpose of the scheme is to avoid tax, it may decide it is not legitimate.

Many investors have used tax avoidance schemes in good faith only to find that they owe years of unpaid tax, so seeking advice is worthwhile to avoid ending up unintentionally getting involved in a dodgy scheme.

Do I need personal tax planning advice?

If you run a business, do freelance or contract work, or have multiple sources of income, then you will need to complete a self-assessment tax return.

Personal tax planning advice can help ensure you complete your self-assessment form accurately (and avoid penalties from HMRC) while ensuring you do not pay more tax than you have to.

Getting advice will also make you aware of all the allowances, reliefs and expenses you can claim and make sure you don't lose money unnecessarily.

It can also save you a great deal of time and effort. 

How do I complete a self-assessment tax return?

If you are on an employer’s payroll (PAYE) and this is your only source of income, then your tax will be deducted at source and you don’t have to do anything.

But if you are self-employed, a freelancer or contractor, or have any other sources of income, such as rental property, then you’ll have to complete a self-assessment tax return.

If you receive a notification to submit a tax return, you must do it, even if you don’t think you owe any tax.

There are penalties for late tax returns, so even if you don’t think you can pay your tax bill, you should still submit your application on time.

The self-assessment tax return form can be daunting, and more so as your finances become more complex.

It’s easy to make mistakes and incur penalties or to err on the side of caution and pay too much tax.

A good accountant can save you money and time and may charge as little as £150 to take care of your return. They’ll also make sure it’s never late. 

What are some of the different types of tax you might need to pay?

Here’s a summary of the different kinds of tax you may need to pay, and how each one is calculated.

Income tax

There are three bands of income tax: basic rate (20%), higher rate (40%) and additional rate (45%).

You start paying basic rate income tax on all income over your personal allowance (£12,570 in the 2024/25 tax year) and a higher rate on everything over £50,270.

You become an additional rate taxpayer when your annual income exceeds £125,140.

National insurance

National insurance (NI) is a special tax that helps pay for state benefits, such as the state pension.

You pay it if you are employed and between the ages of 16 and the state pension age.

There are three main kinds of NI contributions. Employed people pay Class 1 contributions of 8% on their earnings over £12,570. Higher-rate taxpayers pay 2% NI on their earnings above £50,270.

If you’re self-employed, you can find out what NI contributions you must pay in the next section.

Employees, self-employed workers and non-earners can also opt to pay voluntary class 3 NI contributions.

Paying voluntary NI contributions can sometimes make sense for very low earners and non-earners, as your state pension entitlement is based on the number of years you pay national insurance.

What tax do I pay if I’m self-employed?

If you’re self-employed, you’ll pay income tax on your profits – that is, your total income minus business expenses. 

Many business expenses qualify, such as travel, accommodation, staff costs, heating, lighting and rent for business premises, business rates, stock and raw materials. You can find a full list on the government’s website. 

Keep a detailed record of all such expenses and include them with your self-assessment form. 

If you buy something for your business that is an ongoing asset (such as equipment, machinery or computers), this is classed as a capital asset rather than an expense. 

Capital assets qualify for a different kind of tax relief called capital allowances. 

Usually, you can claim relief for up to £1 million of spending on capital assets, though it’s possible to claim lower levels of relief (‘writing down allowances’) on spending that exceeds this. 

Ask an accountant about business expenses and capital allowances and whether you can claim them to reduce your tax bill. 

You’ll also pay NI, which helps to pay for state benefits if you’re at least 16 and under the state pension age. 

If you’re self-employed, you'll no longer have to pay Class 2 NI contributions as of April 2024. 

If your profits are above £12,570, you’ll pay Class 4 NI contributions, which are 6% of your profits between £12,570 and £50,270 and 2% on profits above this. 

An accountant can help you calculate your NI contributions accurately. Contributions are payable via your self-assessment tax return. 

As we previously mentioned, Class 3 contributions are voluntary and for people who aren’t required to pay Class 1 or 2 contributions but who want to keep their rights to certain state benefits.

Capital gains tax

If you sell or dispose of assets that have risen in value, you may have to pay capital gains tax (CGT). This might include business assets, stocks and shares, antiques or any other chargeable possessions.

Capital gains tax is due when you sell a property, but your main home is usually exempt. 

CGT is also payable on gifts, although gifts between spouses are exempt. The value of the gain is based on the asset's value at the time of the gift. Unmarried partners must take particular care as they may trigger a tax charge by passing assets between them.

You pay CGT on the gain in the asset’s value since you acquired it – not on the total sale price.

Moreover, everyone has a CGT allowance (£3,000 or £1,500 for trusts for the 2024/25 tax year), so you’re only taxed on gains above this level.

CGT rates on shares have recently increased, and gains are now charged at two different rates, depending on your tax band, which is worked out by adding your income and taxable gains.

The same rate of CGT now applies whether you are selling investments, antiques or residential property.

If you’re a basic-rate taxpayer, take extra care as your gains (minus your CGT allowance) may raise your annual income into the higher-rate band.

Everything above the band will be taxed at a higher rate, while everything below it will be charged at the basic rate.

It’s worth noting that some assets are exempt from CGT.

This includes (but is not limited to) your primary residence, personal possessions with a value of up to £6,000, betting or lottery winnings and gains from ISAs and Premium Bonds. You can find the full list of exemptions on the government website.

If you are in a relationship, you can potentially save more by using both your allowances.

An adviser can help you calculate your CGT bill accurately and minimise the amount you have to pay.

Inheritance tax

When you die and pass assets to your beneficiaries, they may have to pay inheritance tax (IHT).

This tax needs to be paid within six months of your death, which can create complications if the assets have not been released.

Beneficiaries may have to pay IHT out of their assets before the estate is settled ('probate') or take out a bank loan to cover the bill.

The same applies if you inherit assets from someone else, in that you may have to pay the IHT bill before assets are released to you.

However, there are ways to plan for such situations.

Inheritance is not counted as income, so you don’t have to include it on your self-assessment tax return.

You can find out here about planning for IHT.

What about business tax?

Find out how your small business may be taxed and how to manage company tax affairs, in our article on business tax.

If you found this article helpful, you might also find our article on business property relief informative.

Do I pay tax on shares?

When you buy shares, you usually pay stamp duty, which is calculated depending on how you buy them.

You may also need to pay CGT if you sell shares you own for a profit, exceed your annual allowance and don’t hold your investments in an ISA, or gift shares to someone who is not your spouse or civil partner.

If you earn dividends, you may have to pay dividend tax if the amount exceeds your allowance (and is not held in an ISA or pension).

Learn more: What is the tax rate on dividend income?

Do I pay tax on my pension income?

Any income from pensions is taxed if you exceed your personal allowance (£12,570 for the 2024/25 tax year).

You’ll pay 20% tax on income between £12,571 and £50,270 before a higher rate tax kicks in.

You can withdraw 25% of your pension tax-free with no income tax to pay. There are a couple of options, including taking a 25% tax-free lump sum in one go or taking smaller amounts over time. The details of how you take your pension could impact your tax. 

You also may have to pay tax on your state pension, depending on your other annual income.

It’s a good idea to seek financial advice before accessing your pension so you don’t have an unnecessary and expensive tax bill.

Learn more: what is the 60% tax trap and how can you legally avoid it?

Do I pay tax on foreign income?

Figuring out whether you pay tax on foreign gains and income tax – and how much – can be tricky, as it depends on whether you are considered a UK resident.

Our article on foreign gains and income tax can further delve into the tax implications, but it’s also worth considering expert financial advice.

Do I pay tax on cryptocurrency?

Cryptocurrency has soared in popularity as an alternative (and high-risk) investment.

You may have to pay income tax, and if you dispose of any crypto assets, you may be subject to CGT.

Our cryptocurrency tax guide will reveal everything you need to know, including when you don’t need to pay tax. 

Where can I get help with my taxes?

Making sure you pay the right tax can be difficult, but there is free help on hand.

If you have any queries, call HMRC. You should also call them if you can’t pay your tax bill on time, disagree with how you’re being taxed (for example, if your tax code is wrong) or have additional needs.

If you’re on a low income and HMRC has been unable to assist you, you may be able to get free professional advice by contacting TaxAid or Tax Help For Older People.

Alternatively, you can appoint someone to talk to HMRC on your behalf – so all correspondence will go to the person you’ve appointed unless it’s a tax bill or refund.

In the short term, a trusted individual can help you in a call with HMRC.

You can also authorise them so they can deal directly with HMRC.

Get expert financial advice

Navigating the complexities of personal tax can be daunting, but the right planning can make a significant difference.

By ensuring you meet your tax obligations efficiently and taking advantage of all available allowances and reliefs, you can avoid penalties and maximise your savings.

This approach not only helps you keep more of your hard-earned money but also makes your financial planning more predictable and secure.

Let Unbiased match you with a qualified accountant or financial adviser to ensure you meet your tax obligations efficiently and take full advantage of available allowances and reliefs.