Mind-boggling tax system
I’ve been troubled by taxes recently.Â We all grumble about high taxes and not having enough left over to live on, so I won’t go there.Â But, I’m still trying to understand how and what taxes are taken out.[ad#ad-1]
I suppose I’m lucky that my employer takes out the taxes for me.Â It’s the same in the US when you work for a company.Â And it looks relatively simple – they take out PAYE and NI.Â NI, or National Insurance, is kind of like Social Security and PAYE is all the other taxes.Â I don’t recall if they ever asked about my marital status.Â Unlike the US, they don’t have “exemptions”, where you claim for yourself and all your dependents, and your taxes vary according to this.Â However, they do allow for a certain amount of your pay to be tax-free.
I still cannot get used to being paid monthly.Â Of course, it’s been only two months.Â And the way they worked out the monthly pay was extremely baffling until I called them and they ran through it with me. They did admit it was a bit strange, but they felt it was the fairest way.Â So, even if I work more days one month, I may get less pay.Â It made it difficult to understand the taxation as well.
I had worked out my taxes using calculators on the internet and the figures there differed from each other as well as my actual taxes.Â I’m not sure whether to be pleased or worried because it’s more in one and less in the other, NI and PAYE that is.
The other part of taxes that has me worried is filing.Â In the US, you’re supposed to file, because sometimes you owe money and sometimes you’re due a refund, for various reasons.Â Over here, it seems that most people aren’t required to file because their taxes should already be taken out correctly.Â It’s only if you receive income from more than one source, if you have business-related expenses that you want to claim, or if you are self-employed that you have to file.
To make it more confusing, the deadline for filing by paper was at the beginning of October.Â If you didn’t file it then, you will have to do it online and the deadline for that is the end of January.Â I don’t understand why there is a 4-month discrepancy on that.Â And that being the case, when is the actual tax year?Â In the US, the tax year is the calendar year – January to January.Â You receive your W-2s (tax statements) after January and you can file from that point until April 15th.
Then there’s the question of Child Tax Credits.Â I believe I qualify for this, but do I claim for it by filing taxes?Â Is this similar to “exemptions” for dependents in the US?
I may sound ignorant about the tax system, but if the Chancellor needs tax advice, then I shouldn’t feel so bad.
It’s a good thing that I haven’t worked long enough or earned enough to pay double taxes this year.Â My US income tax form will be relatively blank.Â It may be a different story next year, but by then, I hope to have learned enough about the UK taxes so that I won’t be cheated of my income.Â