The majority of taxes assessed in the UK are at the national level. Taxes paid that are paid at a regional or local level include property taxes. The tax year for citizens in the UK are from April 6 of the current year to April 5 of the following year. Five facts may help to explain how the taxation system in the UK is set up for residents.
Residents of the UK are taxed on capital gains and income they earn in and out of the country. The UK requires most residents to file a tax return based on a self-assessment. The only exception is for anyone who only has savings income and receives regular employment income. Individuals who are employed will be under a pay as you earn system. This is where taxes are withheld by the employer. Anyone who is self-employed will need to file a yearly tax return.
Individuals who reside in the UK will be taxed on all income that is taxable. However, they will have a few allowances that are tax free based on their age and marital status. Certain allowable deductions are available that count against taxable income. This includes contributions to a pension and any donations to charity. If individuals or couples are over 65, then an additional tax free allowance is available.
The majority of investment income earned by UK residents is taxable. This income will be added to all other income when an individual's tax liability is calculated. The tax rate applied to investment income will vary based on type and the applicable tax band. Tax bands are determined from the type of income and how it is earned, such as non-dividend savings and dividends.
This is a tax that applies when an individual sees a gain received over the annualized exception limit of the UK. Current capital gains rates are set at 18 percent and 28 percent as of June 2010. The actual rate that is applied is based on an individual's total taxable income. The higher rate will apply to a resident if their income and gains are above the base limit for the 2012/2013 tax year.
Individuals who receive gifts or assets from a family deceased family member will be assessed the UK inheritance tax. This is tax on the total value of an inheritance received by a beneficiary and will be set at a rate of 40 percent. However, the first 325,000 pounds are subject to this tax until 2015. If there is a sum of the estate of a deceased person left to charity, then a 36 percent tax rate will apply. The transfer of gifts between spouses will typically be exempt from the inheritance tax.
The value added tax in the UK is added to the price paid for goods and services and increased on January 4, 2011 to 20 percent. Individuals who have rental income will have it applied to their income tax.
About the author: Sally is a content writer for Francis Clark Tax Consultants, a business based in South West England who provide a UK tax advice for their clients, visit FCTC.co.uk to find out more about their tax services.