The features of the UK tax system is its complexity. This system has many different taxes, high tax rates, many different tax benefits, and benefits. And in order to understand this, you need time and knowledge of the law.
The main thing to start with is determining the status of a tax resident. It is from this status that the taxation of the payer will depend. To determine tax residence, under UK law, it is necessary to pass certain tests, for example, about the time spent in the country, about the presence of movable and immovable property, about work and position, about family and relatives, and so on. Therefore, these tests do not require special preparation.
Some of them:
1. Test about your connections.
The main purpose of this test is to find out information about your family members, relatives, business, or business environment in the UK, as well as the period of time spent in the country. These factors greatly influence the decision to determine the status of a resident for tax purposes.
2. Automatic test.
This test implies the automatic acquisition of UK resident status during the tax year. This may be available to those who have been in the country for 183 days or more.
Taxation for non-residents
Non-residents are legal, natural persons operating in one state, but permanently registered and residing in another.
Features of the tax system in the UK for non-residents are different. But the tax rates in the country are the same for everyone, regardless of their resident status. It is important that if a person is not a tax resident of the UK, but is a foreigner, then in this case, it is necessary to pay taxes exclusively on income and profit that was earned or received in the UK.
Taxation for residents
Residents are legal or natural persons registered in each country, which are fully subject to national legislation. Everything is much simpler here since all income of residents in any country is subject to general taxation.
Geographic features of the UK tax system
Great Britain is a United Kingdom which consists of England, Scotland, Wales, Northern Ireland and small islands around the British coast. These territories are united by one common tax system and norms of tax law.
But this does not extend to the Channel Islands and the Isle of Man, part of Scotland. These territories have differences in the system and principles of taxation.
Tax year
In the UK, the period from 6 April to 5 April is the tax year. Different taxes will be prorated for this period, depending on your tax status.
The main types of taxes in the UK are personal income tax, capital tax, value added tax, property tax, and inheritance tax. All types of taxes have different ways of calculating taxes and rates.
Income tax
Income tax in the country is progressive and has different groups, there is also a special tax relief – 0% tax on the first 12,570 pounds. In tax year 2023, all individuals are allowed a personal allowance of £12,570 to pay income tax in England.
Income tax rates in England for the 2023 tax year:
- Basic income tax rate – from £12,571 to £50,270 – 20%
- Higher Income Tax – £50,271 to £150,000 – 40%
- Additional income tax rate – over £150,000 – 45%.
Social security taxes
The peculiarities of national insurance are that it is paid by employees and the self-employed from their income, and employers from the wages they pay their employees. The NIC rate depends on which class you have to contribute to:
The first £190 per week is waived.
From £190.01 to £967 per week contributions are 13.25%. Earnings above the upper earnings limit incur a 3.25% fee.
Property taxes
The property tax consists of two parts. This is a municipal tax and a stamp tax on land. The latter tax applies to owners of residential or commercial property worth more than £150,000.
This tax has a progressive form and the best advice for calculating this tax is to use a special online calculator. But this tax has its own characteristics, as it has some exceptions. Partially exempt from paying stamp duty on land are those who make the acquisition of such property for the first time.
The council tax settlement covers the region or county on its own. For this, specialized bodies annually make a special assessment of property. Based on this valuation, the tax rate is subsequently determined.
Capital gains tax
If there are assets, capital gains tax is applied. This works as long as there is a difference between the selling price and the buying price. In 2023, if there is excess capital of £12,300 for individuals, then you will have to pay this tax. This is not a separate tax, as it will be added to income tax. The way you make your profits and your income tax rate affects your capital gains tax rate.
Capital gains tax for taxpayers with basic income tax rate:
- 18% on income from residential property
- 10% on income from other taxable assets
Capital gains tax for taxpayers with a higher rate:
- 28% of residential property
- 20% of other taxable assets.
Company taxes and UK VAT rates
Companies are considered tax resident and pay UK corporate taxes if registered or managed in the United Kingdom of Great Britain. British corporation tax in 2023 is 19% . Companies must register for VAT once turnover reaches the £85,000 threshold for any 12-month period.
- 20% – standard rate
- 5% reduced
- 0% applies to a number of products.
Dividends
The first £2,000 of dividends are not taxed. The tax rate on dividends depends on what income tax rate you pay by adding your total dividend income to other income in the same tax year.
- 8.75% for base rate taxpayers
- 33.75% with a higher rate
- 39.35% with additional rate.
Advantages of the UK tax system
The advantages of UK jurisdiction are obvious. This country attracts investors and immigrants with a stable economy and political situation in the country, a high standard of living, access to the financial market and global business platforms.
A separate advantage is a flexible taxation system. Despite the standard, and sometimes high tax rates, doing business here is very profitable. The UK Government offers various tax benefits to non-residents, such as cash remittances. Also, the UK has concluded with many countries the Double Taxation Avoidance Act, which will allow businesses to operate safely, legally and without overpayments.
Read more: https://taxtaxation.com/unusual-taxes-in-england/
