The UK has the longest tax code in the world since 2009, and it's not easy to understand. According to the international legal research company LexisNexis, the UK tax code has doubled in size since 1997, reaching 11520 pages. But, our team of professionals who offer taxation assignment help has come up with this blog that will make it easier for you to understand it. In this, the major taxes applied in the UK are explained in a lucid manner which can help you absorb better. Read further to get a proper idea of the taxation system followed in the UK:
Based on the revenue it generates, the personal income tax is the most significant tax followed by national insurance contributions, value-added tax, and the corporation tax. The largest source of revenue in the UK, the income tax was first introduced during the Napoleonic wars, and then it was permanently re-introduced in 1842. Corporation tax applicable to companies was started in 1965. Now, known as VAT was earlier called the purchase tax. The rate of personal income tax was 33% which was reduced to 20% during 1979-2007, and it was done by Margaret Thatcher. The rate of purchase tax was 25% at the start of 1973, and it is 20% from January 2011.
In the UK, VAT is regulated by Value Added Tax Act 1994 along with acts like Finance Act which sets the annual VAT rates. Standard rate(20%), reduced rate(5%), and Zero rate(0%) are the three rates of VAT. The registration threshold for business is £83,000 of non-VAT exempt income per financial year and it is £70,000 for distance selling into the UK. To reclaim VAT on purchases, businesses have to register voluntarily before the registration threshold is passed. Its returns should be submitted online every three months and these periods are known as VAT accounting periods.
It is regulated by Income Tax Act 2007. The rate of this tax depends on the earning of the person above his personal allowance in the tax year which runs from 6 April of the current year to 5 April of next one. If the earned income is £120,000 or above, then the personal allowance is zero. The rate of income tax is 20% for the earned income of £0 to £32,000 above the personal allowance. If the earned income is £32,001 to £150,000 above the personal allowance, then the rate is 40%. If it exceeds £150,000, then the higher rate of 45% is applied. The rates are different for savings and dividend income.
It is administered by the Corporation Tax Act 2010 and other acts. All the foreign and limited companies in the UK have to pay corporation tax on taxable profits. It includes trading profits, chargeable gains from selling assets and investments. The rate of this tax is 20% since 1st April 2015. A limited company must file annual accounts with Companies House after nine months of company’s financial year. If the company profits £1.5 million, then they must pay corporation tax after nine months one day after company’s accounting period. For profits exceeding £1.5 million, it should be paid in four installments.
Apart from the above-mentioned taxes, there are many other types of taxes in the UK like employment tax, capital gains tax, motoring tax, inheritance tax, etc., but this blog gives a compact information about the major ones applied in the UK. And, it will surely help you in understanding the taxation system of the nation.