As you can imagine this is not a question with a simple answer.
However, we are asked this question regularly and determining the amount of income tax you will pay will involve several considerations specific to your financial situation. Accurate calculations demand knowledge of tax codes, allowances, and deductions. Consultation with a tax professional ensures precise estimation and compliance. But let’s look at the possible tax you may have to pay:
Tax for Individuals or a Company – Income Tax
So, to begin let’s look at the possible tax an individual or company may have to pay:
Income Tax
This is most commonly where an individual pays tax on their income
For the 2023/24 the tax rates are as follows:
- Earnings up to £12,570 the tax rate is 0% (Personal Allowance)
- Earnings from £12,571 to £50,270 the tax rate is 20% (Basic Rate)
- Earnings from £50,271 to £125,140 the tax rate is 40% (Higher Rate)
- Earnings £125141+ the tax rate is 45% (Additional Rate)
Considering these rates in the tax year 2023/24 the higher rate tax threshold starts at £50,271 and stops at £125,140.
This of course includes the most common personal allowance with the tax code 1257L (12570 + 37701 = 50271).
So, somebody on a tax code of 1257L would not pay tax on the first £12,570 of their income.
Tax For a Company – Corporation Tax
Now let’s consider the tax a company may have to pay:
Corporation Tax
This is where a limited company pays tax on its profits.
The main rate of Corporation Tax from effect 1st April 2023 :
- Profit below £50,000 the rate is 19%
- Profit between £50,000 and £250,000 (eligible for marginal relief) the rate is 25%
- Profit above £250,000 (not eligible for marginal relief) the rate is 25%.
How much income tax will you pay?
As you can see there are numerous deciding factors to take into account when calculating how much tax you must pay.
For an individual paying income tax. the tax code can differ per circumstances, which may include being supplied with a company car,
a tax amount from previous years as examples.
If goes without saying that my advice would always be to employ the services of a bookkeeper or accountant to calculate any tax liability.
Here we are considering the tip of the iceberg, as we previously mentioned there are many factors that go into calculating any amounts due.
We all know how imperative it is to pay the correct amount of tax, so by using a professional to complete your returns you can be rest assured that
you will not be overpaying or under paying your due tax.
Where can I get help with my oncome tax?
If you would like to find out more on how we at Tandem Business Solutions can assist you with your tax affairs please just click on the BOOK A CALL button.