Taxes in United Kingdom

Below are the important types of taxes in United Kingdom.

  • Income Tax: This tax is paid based on income of indidual during the tax year. The basic rate of income tax is 20%, paid on income over the income tax threshold of £10,400.
  • National Insurance Tax: National Insurance (NI) is a tax which is taken from pay for the UK’s health and social security system (including state pensions). These payments are known as National Insurance contributions (NICs).
  • Value Added Tax: Value Added Tax is applied on the trade of taxable services and products made in the country.
  • Excise Duty: Excise duties are chargeable on most hydrocarbon oil products, alcoholic drinks, and tobacco products imported into or produced in the United Kingdom.
  • Corporation Tax: Corporation Tax is a tax on limited companies’ taxable income or profits. For Corporation Tax, companies have to calculate their own tax liabilities, and are liable to pay the calculated tax to the Inland Revenue without prior assessment. Payment of Corporation Tax itself is due 9 months and one day after the company’s “normal due date” – usually the last day of your annual accounting period. The current Corporation Tax rate is 20%. In the 2016 Budget, the Government announced its intention to cut the rate of Corporation Tax to 17% by 2020.
  • Stamp Duty: Stamp duty is imposed on some products and transfer of shares. Stamp duty is not imposed on transactions, but stamp duty land tax calculation is based on the land transactions.
  • Motor Tax: It comprises the vehicle excise duty and fuel duty. Many other taxes like various statutory fees, London’s congestion charge etc, are also included in motor tax.
  • Inheritance Tax: If a person, domiciled in the country, expires then the scope of inheritance tax will be opened. This tax will be acted upon death and some longtime transfer at a rate of 40% and 20% respectively.
  • PAYE: Pay As You Earn (PAYE) is a scheme operated by HM Revenue & Customs to take income tax from employees as they earn it. If you run your business as a sole trader, then you are self employed and not affected by PAYE. You will self assess your income and complete a tax return.
  • Capital Gains Tax: From 6th April 2008, the Government has applied a flat 18% CGT rate on business disposals. However the so-called “entrepreneurs relief” scheme allows business owners to pay a reduced rate of 10% on business disposals up to a lifetime allowance of £10 million.
  • Capital Allowances: The system of tax relief on investment in business equipment can be complicated. As a rule of thumb, when your business makes a significant investment in capital equipment, you cannot normally set the entire purchase cost against that year’s profits. Exceptions to the rule can include instances when the value of the purchased item is small, or a particular tax relief applies.