Why withholding tax is deducted

People who are self-employed generally pay their tax this way. Avoid a surprise at tax time and check your withholding amount. Too little can lead to a tax bill or penalty. Use the Tax Withholding Estimator. To change your tax withholding, use the results from the Withholding Estimator to determine if you should:.

Note: You must specify a filing status and a number of withholding allowances on Form W—4. You cannot specify only a dollar amount of withholding. More In Pay. A person receiving or entitled to receive a payment from which income tax is required to be withheld is a withholdee while a person required to withhold income tax from a payment made to a withholdee is referred to as the Withholding Agent.

Withholding tax applies to specific payments including payment that is to be included in calculating the chargeable income of an employee from the employment, payment of investment return including dividend, interest, natural resource payment, rent or royalty, payment in respect to service fee and contract payments and payment in respect to supply of goods to the government and its institutions. Certificates are obtained in the Revenue Gateway System and can be printed by Withholder or withholder as the case may be after making payment.

Final withholding taxes are taxes in which the withholdee cannot claim any tax credit when calculating the income tax payable for a year of income. Non final withholding taxes: are taxes which the withholdee is entitled for a tax credit an amount equal to the tax treated as paid for the year of income in which the amount is derived.

Toggle Navigation. You are here: Home Withholding tax. Withholding tax. Introduction: Withholding tax is the amount of tax retained by one person when making payments to another person in respect of goods supplied or services rendered by the payee.

FEB All Income tax dates. Pages in this section. Topics Record keeping. Situations I've been asked to complete an individual tax return IR3. Roles Self-employed. Moving between Inland Revenue sites. Continue to old site. Last updated: 29 Jun