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Income Tax

Income tax is a tax paid on income. It is paid by employees and people who are self-employed. It may also be payable if you aren't working if, for example, you have an income from a pension or savings. Not all types of income are taxable and it will seldom be the case that all of your income is taxed. There is no minimum age at which a person becomes liable to pay income tax. What matters is the amount of your taxable income. If this is below a certain level, no tax is payable.

Income on which tax has to be paid includes:

earnings from employment, including benefits in kind

earnings from self-employment

most pensions income, including state, occupational and personal pensions

some social security benefits

interest on most savings

income from shares (dividends)

rental income

income from a trust.

Income tax law is a section of the law pertaining to taxes on income, including personal income as well as revenues earned by businesses. It is part of the tax code, which covers a variety of other taxes and usually provides for the establishment of a tax agency to enforce the code. Legislatures regularly update the tax code to change policies, reflecting changes in the financial climate. Individuals who owe taxes can consult tax agencies to get the most current information so they can file tax declarations appropriately.

Income Tax Payable

An income tax payable is an entry on accounting disclosures indicating the amount of money due for income tax within the next year. Many companies establish an income tax payable account for the purpose of setting aside funds for paying income taxes. The income tax payable is considered an outstanding financial liability. Individuals are also required to keep track of their income for the purpose of filling out tax declarations and paying their income taxes appropriately.

Tax Deduction

A tax deduction is a reduction of a taxpayer's total income that decreases the amount of money used in calculating the tax due. Essentially, a tax deduction is a break granted by the government. It reduces taxes by a percentage that is dependent upon the income bracket of the taxpayer.

Tax liability

A tax liability is money that is owed for some type of tax. The term is typically used to refer to income or business taxes owed to a national, regional, or local tax authority.In most jurisdictions, people who earn above a very low threshold of income owe taxes to at least one tax authority. For example, many people pay taxes each year to a national government. Often, the taxes are a percentage of the amount of income a person has in a given year, which means liability varies from person to person. Likewise, deductions for certain expenses and the care of dependents may also affect a person's tax liability. Businesses can have tax liability as well. Depending, for example, on the way a business is structured, it may be subject to personal taxes on income, such as in the case of a sole proprietorship, or corporate taxes if it is a ...
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