A brief overview of Taxation in the UK

Each country has a unique taxation policy,  this is what leads to a diverse taxation and finance structure. While food and drinks can be tax-free in one Nation,  on the other hand, they can be one of the highest generating entities. This completely depends on the Government of the nation and several other factors such as the country’s economic condition, geographical location and many other similar factors.

The UK  is one of the countries where the track structure is quite clear and straightforward. Although,  the taxes are difficult to calculate and you might need an accountant for them. But, the policies and categorisation are quite crisp. Let’s  discuss the structure of taxation in UK:

Table of contents

• Taxation in UK
• Taxes Administered by HMRC
• Taxes Administered by Local Authorities
• Personal taxes
• People Liable to Pay Tax in the UK
• Summing Up

Taxation in UK

In the UK, taxes are collected at various levels.  There is a body known as the Her Majesty’s Revenue and Customs (HMRC). The prime task of the HMRC is to collect and administer taxes at the government level. At the local level,  there are some councils that collect taxes. The UK government is quite strict with its taxation policies and actively collects taxes. The UK government collected a tax of £828 billion in the financial year 2019/20, which is 37% of its GDP.

The main sources of taxes that form the state’s core are income tax, savings income tax, value-added tax, inheritance tax, property taxes, and capital gains tax. A national insurance number is a prerequisite for paying taxes in the UK. A person holding foreign citizenship might need to submit an application to get a national insurance number. The assignment of the national insurance number depends on the type of visa that you hold.

England, Scotland, Wales, and Northern Ireland come under the ambit of the British fiscal system with a bit of changes according to the local legal system of the developed governments (for example, Scotland).

Taxes Administered by HMRC

HMRC is a federal institution which is responsible for collecting taxes from diverse fields. The common taxes collected and managed by the HMRC include:

• Income Tax
• Inheritance Tax
• VAT
• Capital Gains Tax
• Corporation Tax
• Insurance Premium Tax
• Environmental Taxes
• Stamp Duty
• Land and Fuel Taxes
• Climate Change Levy and Landfill Tax
• Customs Duty
• Excise Duty

Taxes Administered by Local Authorities

Council tax and business rates are one of the most essential sources of income for the local authorities of UK. The local authorities claim the Council taxes and several other forms of penalties,  fees, and other claims.

Personal Taxes

Personal taxes are paid against income, benefits or gains that are of one’s personal or individual interst. Some common examples of personal tax are:

• Income Tax
• Inheritance Tax
• Council Tax

People Liable to Pay Tax in the UK

The number of taxpayers in the UK is estimated to be above 30 million. UK residents should pay taxes to the government for income earned by working in UK or abroad. A  person is liable to pay taxes if they have spent a minimum of 183 days for the tax year in the UK,  which should include at least 30 days in the year under consideration.

 A  person who doesn’t hold citizenship in the UK should pay income tax on income earned from the UK,  he is released from paying taxes on income earned from abroad. A  person is that as a non-resident if he spends less than 16 days for the tax year in the UK or less than 46 days if they have not been considered a non-resident for the last three tax years.

Summing Up

Taxation can be tricky and time-consuming. It is impossible for business owners or people with multiple income sources to align the income and calculate the taxes. They might feel that taxes are burdensome for them, and they need a tax accountant or tax consultant to clear all the queries about taxation.

If you feel that filing tax returns and paying taxes is quite overwhelming for you, or you are looking for startup accountants, you can reach out to us at 123financials.com, and we will be more than happy to help you out. Please send us your requirements now and get a quote.