Hi, could anyone give some advice on how to calculate the tax that you may owe or are to be refunded on a tax return. Also, are drawings put into a tax return? thanx
To calculate the tax payable/repayable you need to ascertain the total statutory income for the year, which could include trading income, employment income, interest received and dividends. You will also need to calculate any capital gains/losses in the year. There may also be losses brought forward from previous years which could be utilised. The income/gains will then be subject to annual allowances and the excess will be taxed at the relevant tax rates. If there are losses in the year there is potential to carry these back to prior years or offset against taxed paid in employment.
Check out the HMRC website which contains a lot of guidance notes on calculating tax and completing a tax return.
Drawings would not be included in a tax return as the individual is taxed on their share of the net profit the business makes not the amount withdrawn from the business.
To calculate the tax you owe or are to be refunded on a UK tax return, start by totaling your taxable income, which includes wages, dividends, interest, and rental income. Subtract any allowable deductions, such as personal allowances and eligible expenses, to find your taxable income. Apply the appropriate tax rates to this taxable income to determine the amount of tax due. Subtract any tax already paid, such as PAYE or advance payments, to find the tax you owe or are to be refunded. Drawings, which are withdrawals from business profits, are not included in a tax return for sole traders or partners, as they are not considered taxable income. Instead, profits before drawings are taxed.
To calculate the tax owed or refunded on a tax return, sum your taxable income, apply deductions, credits, and compare it to your payments. Drawings aren't included in a tax return for sole proprietorships; they affect owners equity. For detailed help, consult tax services.
