Great Britain is a wonderful country not only for tourists and travelers, but also for investors. They consider Britain to be a country of loyal taxation, as there is a differentiated approach, benefits, and the government promptly regulates tax policy in times of crisis. Before moving to the United Kingdom, you need to learn all the main UK taxes, rates and principles of taxation.
Double UK taxes agreement
With all the countries of the CIS and Eastern Europe, the UK has signed an agreement in accordance with the OECD convention. The agreement provides for benefits and a zero rate for the payment of taxes previously paid in another country. The terms of each agreement differ with respect to dividends, interest, capital gains. The standard exception to the agreement is inheritance tax.
UK taxes resident
A tax resident is a person who actually stays in the UK for 183+ days during a tax year. Taking into account the specifics of the English fiscal calendar, staying in London from July 1 to April 5 means acquiring the status of a tax resident of the UK.
If you live permanently in the UK and own property: resident status can be obtained without the 183+ condition. The more connecting factors, the shorter the period of stay required to acquire resident status.
British domicility and the right to remit.
The UK takes into account not only the status of a resident, but also the place of permanent residence, or domicile of the taxpayer. The holder of a British domicile pays taxes on income received anywhere in the world (subject to an agreement to avoid double taxation). British domicile have:
- children of fathers who are citizens of the UK;
- permanently or permanently residing in England, Wales, Scotland or Northern Ireland;
- conditional domicile is received by everyone who has been a resident of the UK for 15 of the last 20 years.
A non-domicile pays taxes exclusively on income received in the territory of the UK and imported into the country. Taxation based on remittance does not arise automatically – it is requested at the time of declaration. After a certain period, remittance becomes paid, from £30,000/year.
Net wealth before UK immigration
The fiscal system separates the funds that an immigrant had before entering the UK and the income received after entry. The state obtained before obtaining the status of a tax resident refers to “net capital”, after moving to the territory of the country it is not taxed. In the future, the amount of income of a tax resident after taxes is added to the “net capital”.
UK income tax for individuals
There is a progressive scale with a non-taxable minimum Personal allowance. Paid from wages, pensions, bonuses, bank interest, other income. Employers pay taxes for employees. The self-employed declare their income on their own.
Income tax rate for the tax year 2021-2022:
0% ≤ £12,570 plus:
- first £1,000 self-employed income;
- dividends up to £2,000;
- ISA (individual savings accounts);
- national savings certificates.
20% £12,571 – £50,270
40% £50,271 – £150,000
45% ≥£150,001
Individual contribution to the UK social insurance system
Every immigrant receives a NIN: national insurance number. National Insurance Contributions fund health care, social programs, benefits, and pensions.
By the way, income from the rental of real estate is included in the declaration. The landlord has the right to exclude from the tax base the costs of real estate insurance, payment of municipal assemblies, utilities, remuneration of realtors and management companies.
UK capital gains tax
The tax base is the profit received from the sale of capital assets: real estate, securities, business reputation, franchise. Zero rate applies to profits up to £12,300.
The rate takes into account the period of ownership of the asset, the average tax is 20%. Profit from the sale of residential property is taxed at a rate of 28% (except for the sale of the first home).
UK stamp duty
Mandatory stamp duty is paid by the buyer of the property. There is a progressive scale, taking into account the tax status of the buyer, the presence of other real estate, the price of the object.
Buyers are individuals. Stamp duty is not charged when buying a first home up to £300,000, a pool of apartments in one residential complex, some land plots. Non-residents and foreign buyers pay an additional 2% of the property price.
UK inheritance and gift tax
Payers are heirs and endowed persons. Inheritances up to £650,000 for spouses and £325,000 for everyone else are exempt from tax. Assets, real estate, other inherited property above the threshold are subject to taxation at a rate of 40%.
UK property tax
There is no state tax for individuals. Property owners pay municipal fees:
- Council tax – a monthly municipal fee, the amount depends on the decision of local governments. Calculation base – the estimated value of the object at the time of acquisition with a revision every 5 years.
- Service charge – operating fees, depending on the quality of housing and rates of the municipality, are calculated for 1m² of the object;
- Utility bills are additionally paid: bills for electricity, water, gas.
- Legal entities – owners of luxury residential real estate worth more than £500,000 annually pay ATED (Annual Tax on Enveloped Dwelling). Calculated at a progressive rate, see the current figures for 2021-2022 here. ATED is not charged if the company pays tax on rental income.
UK corporate tax
The British analogue of income tax from the sale of assets and activities of a legal entity. Resident legal entities pay tax on any income anywhere in the world. Non-residents – exclusively from income received in the UK. Payers:
- legal entity with limited liability;
- foreign companies with a head office or representative office in the UK.
The corporate tax rate until 2023 is 19%. In 2023, the rate will be raised to 25% for companies with annual income above £50,000.
UK VAT
Value added tax at the rate provided for companies with a turnover of more than £85,000 per year. Some companies voluntarily receive the status of a VAT payer. The basic rate is 20%, children’s goods – 0%, some groups of goods – 5%.
Last tips
1. Find a reliable tax advisor. The specifics of the British fiscal system allows you to benefit from proper tax planning.
2. Determine the form of ownership. Opening a legal entity does not mean tax optimization. The purchase of real estate in the name of a company and is appropriate for the acquisition of several assets. If the owner has only 1-2 objects, the cost of servicing the legal entity will cost more than the saved difference.
3. Prepare a business plan. Tax planning begins before moving and becoming a resident. Estimation of net capital, volume of venture investments, return on investment in real estate and land plots, selection of optimal objects requires a scrupulous accounting of all expenses.
Read more: https://taxtaxation.com/lump-sum-tax-in-switzerland/
