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News,May 2018

taxes higher in the UK

Are Taxes Higher in the UK? UK Vs US Full Breakdown

21/04/2026tax , Tax Issues , Tax News and Tips , Tax Saving Tips , Taxation

The short answer to the question “are taxes higher in the UK” is yes. The United Kingdom is a relatively high-tax country compared with the United States, but it is not an extreme outlier by European standards. However, the picture isn’t as simple as one country just charging more than the other. While the US has federal tax, state tax, and social security, the UK uses Income Tax, National Insurance (NI), and VAT. Once you add everything up, the gap is often narrower than you’d assume. For middle-income earners, the UK can feel heavier upfront, but Americans often end up paying similar amounts once state taxes and “hidden” costs are included. Ultimately, the answer depends on what you earn, where you live, and what “extras” you’re paying for out of your own pocket. In this blog, we’ll explore: Are taxes really higher in the UK? UK taxes vs US: The head-to-head comparison Practical ways to lower your tax bill And much more… So, let’s break it down! How Does the UK Income Tax System Work? In the UK, the main taxes most people deal with are: Income Tax: It’s based on what you earn National Insurance: These are contributions that build entitlement to the State Pension and certain benefits. VAT (Value Added Tax): It’s charged on most goods and services Council Tax: It’s a local tax for services like rubbish collection and schools These are the everyday taxes that shape whether people feel the taxes higher in UK compared to elsewhere. The Current State of UK Taxes Right now, the UK is in a bit of a strange spot. Historically, we’ve had a lower tax burden than our neighbours in Europe, but that gap is closing fast. We are currently seeing the highest level of taxation in the UK since the post-war era of the 1940s. A big reason people feel like taxes are higher in the UK is something called “fiscal drag.”  Fiscal drag refers to the situation where governments freeze tax thresholds with rising wages. And as your wage increases, you move into a higher tax bracket, despite there being no increase in the rates themselves. For healthcare workers who have seen recent pay bumps, this has been a major talking point. Are Taxes Higher in the UK? The answer depends on what you are comparing the UK to. Compared to the past: Yes, taxes are higher. According to the latest forecasts from the Office for Budget Responsibility (OBR), the UK tax-to-GDP ratio is expected to rise to 38.5% by 2030–31. Compared to the USA: Yes, UK taxes are generally higher, especially when you include VAT (Value Added Tax). On the other hand, the US relies on varying state-level sales taxes rather than a national consumption tax. Compared to Europe: No, UK taxes are typically lower than in most Western European and Scandinavian countries like France, Germany, and Denmark. How the UK Income Tax Brackets Work Right Now In the UK, we have a system where the more you earn, the higher the percentage you pay. For the 2026/27 tax year, the thresholds have stayed frozen. It means that as your salary goes up with inflation or a promotion, more of your money falls into higher brackets. Because these thresholds aren’t rising alongside wages, many employees are finding their taxes higher in the UK than in previous years. Personal Allowance: You don’t pay any tax on the first £12,570 you earn. Basic Rate: You pay 20% on earnings between £12,571 and £50,270. Higher Rate: This jumps to 40% for earnings between £50,271 and £125,140. Additional Rate: You pay 45% on any earnings over £125,140. For many senior doctors or consultants, there is also the “60% tax trap.” This happens between £100,000 and £125,140 because you start losing your £12,570 tax-free allowance. As a result, it makes your tax rate much higher in that specific window. The Big Comparison: UK Taxes vs US If you look only at headline income tax bands: UK main bands: 20%, 40%, 45% across three brackets (ignoring Scotland’s extra bands) US federal: 10% up to 37% across seven brackets From that narrow view, UK rates look higher. This is why you see the question “are UK taxes higher than US” repeated so often. However, the US also has: State income taxes in many states are commonly 5% to around 13% at the top end City income taxes in some areas Social security and Medicare on top of the federal income tax Once you add a state like California or New York into the mix, the combined US top rate (federal + state + Medicare) can exceed many UK earners’ marginal rate. On the other hand, someone living in a state with no income tax, such as Florida or Texas, may face a lower overall tax rate in the UK vs the US comparison, especially if they have higher earnings. So when you ask “is UK tax higher than US?”, the answer depends heavily on: Where in the US are you comparing with How much you earn and what form your income takes (salary, business profit, dividends, etc.) Are UK Taxes Higher Than US Taxes? Yes, overall, taxes higher in the UK are a general reality when looking at the national average. This is because the UK government offers more public services. These include universal healthcare (through the NHS) and public pensions, which are funded by taxes. In the US, many of these services are either privatised or funded separately. This leads to a lower tax rate overall. That being said, taxes in the US vary greatly depending on the state. Some states, like California, have high state taxes, while others, like Texas, have no state income tax. On the other hand, the UK system is much more consistent than the US system. While Scotland sets its own rates, the rest of the UK follows a single, predictable tax structure. What Should You Look at When Comparing Your Tax Position? If you are trying to work out whether you personally face taxes higher in UK than you might elsewhere, it …

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What Are Nanny Taxes

What Are Nanny Taxes? 2026 Guide for UK Employers

18/04/2026tax , Tax Issues , Tax News and Tips , Taxation

Hiring a nanny is a huge relief, especially for busy healthcare professionals in the UK who work long or irregular shifts. However, after celebrating your perfect childcare match, you’ll quickly discover the world of “nanny tax” waiting for you. Nanny tax is the system where you deduct the correct amount of tax from your nanny’s wages and pay it over to HMRC. If you are wondering how to manage nanny payroll and taxes in the UK, you are in the right place. This comprehensive guide walks you through everything about UK nanny tax requirements for 2026 Let’s break it down! What is Nanny Tax? In the UK, if you hire a nanny directly, they are almost always classed as your employee. This means you can’t just hand over cash at the end of the week. You are legally required to set up a PAYE (Pay As You Earn) scheme to deduct their taxes before you pay them. That means you’re responsible for: Registering as an employer with HMRC Running payroll correctly Deducting Income Tax and NICs from your nanny’s wages Paying the employer NICs Submitting reports to HMRC Pro-Tip: Always agree on a Gross Salary with your nanny, not a Net (take-home) pay. If you agree on Net, you (the employer) become liable for any changes in their tax code. This can unexpectedly increase your total costs. Do I Really Have to Pay Nanny Tax? Yes. Because a nanny works in your home and follows your instructions, HMRC almost always views them as an employee rather than self-employed. Therefore, you really have to pay nanny tax. You cannot simply ask your nanny to be self-employed to avoid these duties. How to Hire a Nanny Legally (2026/27) Making the hiring of a nanny legal begins with straightforward steps: Check Right to Work: You must verify your nanny’s legal right to work in the UK before they start. Agree Gross Pay: Agree on a Gross salary (not Net) to avoid unexpected tax costs. From 1 April 2026, the National Living Wage for those aged 21 and over is £12.71 per hour. Secure Insurance: It is a legal requirement to have Employers’ Liability Insurance in place by the time your nanny starts working. Issue Contract: You must provide a written statement of employment particulars on or before the nanny’s first day. Note: In 2026, this must also include a statement that the worker has the right to join a trade union. Register with HMRC: You must register as an employer to set up a PAYE scheme. This allows you to deduct tax and National Insurance correctly. Set up Pension: You must auto-enrol your nanny into a workplace pension if they meet these 2026/27 criteria: Aged between 22 and State Pension age. Earn more than £10,000 per year (or £192 per week / £833 per month). Quick 2026 Check   Requirement  Details for 2026/27 Min. Wage (Age 21+) £12.71 per hour Min. Wage (Age 18–20) £10.85 per hour Pension Trigger £10,000 per year PAYE Registration Required if paying £129+ per week How Do I Know If I Need to Pay Nanny Tax? Not every babysitter triggers the need for a full payroll, but most permanent nannies do. You must register for a nanny tax scheme if: You pay them more than the Lower Earnings Limit (£125 per week for 2025/26 or £129 per week for 2026/27). They already have another job. They receive a pension. Even if they earn less than the tax threshold, you still have to keep records. You also need to register as an employer to stay on the right side of the law. What Are My Main Nanny Tax Responsibilities? When you step into the role of an employer, your to-do list grows a bit longer. Your primary nanny tax responsibilities include: HMRC Registration: You must register for a PAYE scheme before your nanny’s first payday. Calculating Tax and NI: Every time you pay them, you need to work out how much Income Tax and National Insurance (NI) to deduct. Paying Employer NI: On top of the nanny’s salary, you have to pay Employer National Insurance. For the 2025/26 and 2026/27 tax years, this is 15% on earnings above the Secondary Threshold of £5,000 per year. Issuing Payslips: It is a legal requirement to give your nanny a breakdown of their pay and deductions. Filing RTI Returns: You must report every payment to HMRC on or before the day you pay your nanny. If I Hire a Nanny, How Do I Pay Taxes? Paying a nanny tax involves a few key steps. Here’s how you can ensure everything is in order: Step 1: Register as an Employer with HMRC The very first thing you need to do is register as an employer with HMRC. You should do this even if your nanny hasn’t started yet, but no later than your first payday. HMRC will set up a PAYE (Pay As You Earn) scheme in your name. This is the system used to collect Income Tax and National Insurance. Step 2: Set Up Nanny Payroll Once you have your employer credentials, you need a system to calculate the numbers. This is where you work out the gross pay, deductions, and your employer’s National Insurance costs. Many healthcare professionals find it easier to use an end-to-end nanny payroll service because it handles the complicated maths. Also, it ensures you are following the latest tax codes sent by HMRC. Step 3: Deduct Taxes and Pay Your Nanny Every time you pay your nanny, you must deduct the correct amount of tax and National Insurance. For the current tax year, most people have a Personal Allowance of £12,570. It means they don’t pay Income Tax on earnings below this. However, as an employer, you also have to pay Employer National Insurance on top of their salary. Paying a nanny legally means giving them a payslip that clearly shows these deductions, so there is a clear paper trail for both of you. Step 4: Report to HMRC and Provide a P60 Instead of a single “tax return,” you actually report to HMRC every time you pay your nanny through a system called Real Time Information (RTI). …

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what is a tax reference number

What is a Tax Reference Number?

22/04/2025tax , Tax Issues

While residing in the UK, everyone knows that they are liable to pay tax to the HMRC. For making timely payments to the HMRC, the residents have to file a tax return against a unique ID assigned to them by the HMRC. This is known as a tax reference number. What is a tax reference, and why is knowing your tax reference important for filing tax returns? Read this article to have an idea. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help about tax reference number. What is a tax reference? A tax reference number is issued as a unique ID by the UK government to every taxpayer for filing tax returns and other payments to the HMRC. The tax reference number is also known as the PAYE reference number. This number consists of letters and numbers in a specific format assigned to employers and occupational pension providers by the HMRC. This number is compulsory for abiding by the rules and payroll taxation regulations of the UK government. In general, this number is formatted as 123/A45678, Consisting of 3 numbers separated by a letter followed by 5 specific numbers. Why Employers Need a Tax Office Reference Number? The tax reference serves as a tax ID for each person. The employers need the tax reference to ensure that accurate tax is paid for each individual and an accurate record is maintained by the HMRC. This number is also imperative for deducting the national insurance contribution of salaried persons. Compliance with Tax Office Reference Number regulations is important for avoiding penalties from the tax office handling the taxation matters, but it is also crucial for keeping efficient payroll management, tracking pension contributions, and effective record-keeping. How is PAYE relevant in this regard? The amount of tax paid by a taxpayer is based on the annual income. The HMRC gives a tax code to the employees. The tax code depends upon the difference in earnings of the employees. Employers of the companies use this code to calculate the amount of tax. The amount of tax is then deducted automatically from the account of the employee through PAYE. The tax code for the current year can be found on the pay slip of the employee or from GOV.UK. There is a limited amount of earnings that is exempt from tax; this is called personal allowance. In the financial year 2025/2026, the personal allowance on the basic tax rate is £12,570. For earnings above £12,570, you are imposed tax depending on the increase in taxable income. This simply implies that the more you earn, the more tax you pay to the HMRC. If the annual earnings of an individual in the UK are £125,140, then the person cannot claim the personal allowance. The HMRC has also set other criteria for personal allowance, such as the Marriage Allowance, the Personal Savings Allowance, and the Dividend Tax Allowance. What is a tax reference in the case of national insurance contributions? What is a tax reference in the case of national insurance contributions? It is the same number of national insurance contributions as well. In the UK, national insurance is a tax paid by the residents, which is used as funds for social security benefits by the UK government, such as state pensions or health benefits. National insurance is paid by all individuals, whether employed in a company or self-employed. The amount of national insurance imposed on an individual depends on the annual income. The HMRC has created classes for this purpose. An individual’s class of national insurance may depend on their employment status. The classes of national nsurance are labelled as 1,2 and 4 contributions. If you’re employed If  you are employed, the national insurance is  deducted as a Class 1 national contribution from your salary only if you are Below the age limit described by HMRC earning above £242 weekly by doing one job Employers only pay Class 1A and Class 1B national insurance for the benefits they have provided to the employee and the employee’s expenses. If you earn less than £242 a week from one job If an individual is earning less than £242 (between £123 and £242) per week from one job, then he is not liable to pay the national insurance; however, he is still eligible to enjoy certain benefits from the UK government, such as state pension and national health services. If the weekly earnings of an individual are less than £123 a week from one job, he may choose to pay Class 3 contributions of national insurance to cover the gaps in the national insurance record. If you’re self-employed The amount of national insurance contribution to be paid by a self-employed person is based on their annual profit. If you profit £6,725 or above To compensate for any missed National Insurance contributions, Class 2 National Insurance contributions are paid. In case a business is earning more than £12,570 annually, it is liable to pay Class 4 national insurance contributions. If you profit below £6,725 a year In such a case, you are not imposed any class of national insurance; however, you may choose to pay voluntary national insurance to avoid gaps. Directors, Landlords, and Share Fishermen Different national insurance rules are set by HMRC for directors, landlords, and fishermen. Directors are considered as employees in a company, and they must pay national insurance on annual income from salary and bonuses over £12,570. If you are a landlord and rent your property, then a class 2 National Insurance contribution is imposed if you are landlord by profession your multiple properties are rented out you’re buying new properties to rent out A share fisher is classified as self-employed in the UK and must register for national insurance at the HMRC. If you are a share fisher, you are eligible to pay a special rate of Class 2 National Insurance contributions. If the profits you earn as a share fisher are below the …

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how do I cancel road tax

How Do I Cancel Road Tax?

20/04/2025tax , Tax Issues

How do I cancel road tax? The asset you own in the United Kingdom brings you tax liability that needs to be paid at the end of the tax year to the HMRC. The assets included in the tax range are houses, land, or vehicles that you own. Among other taxes on assets, you need to pay tax if you drive the vehicle/vehicles you own. This tax is called road tax or, formally, vehicle excise duty (VED). However, this tax can be cancelled if certain conditions are met. If you are not updated about the recent road tax changes made by the UK Govt, and how do I cancel road tax, this article will provide all the required details. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help on how do I cancel road tax. Understanding of Road Tax Cancellation How do I cancel road tax? Road tax, commonly known as vehicle excise tax, constitutes a significant proportion of revenue for the UK government. While in the UK, it is essential to pay tax to the HMRC, even if no road tax is applicable; this tax is important for vehicle registration. The tax can be paid to the HMRC through debit or credit cards. The amount of road tax varies according to the region and vehicle type, involving the legal framework regarding vehicle taxation in the UK. Why Does Road Tax Need to be Paid? The road tax is regulated by the DVLA in the UK and was introduced in 1937. The road tax is used by the government to complete local projects, thus upgrading the transport infrastructure in the country. This helps provide better services for the public and improves traffic flow on the highways. In the UK, every car owner is imposed a road tax for driving on public roads and highways. If a person is caught driving an untaxed vehicle, they will be fined £80 by the DVLA, which is reduced to £40 if paid within 28 days of the fine imposition. This fine can increase up to £1000 if a person is caught driving an untaxed vehicle in a public area; in the worst-case scenario, the car may be seized as well. Reasons for Cancelling Road Tax The road tax imposed by the DVLA can be cancelled if the following conditions are met: If you have sold the car or transferred it to someone else. If you are not using a car on the road and declare it as an off-road vehicle (SORN). If the car is damaged and it is unsafe to drive it, the insurance company write off such vehicles. The repair cost of such a vehicle is more than its actual cost, which is totally uneconomical. If the car is stripped of its parts in other vehicles. The car has been stolen. If the car you own is exempt from road tax. You have exported the car to another country. How Do I Cancel Road Tax? The following steps need to be followed while applying for road tax cancellation: You will need a logbook for your vehicle (V5C). From the logbook, you will need the 11-digit number mentioned in the yellow section labelled as “Sell, transfer or part-exchange your vehicle to the motor trade” in the logbook. You may also need the 16-digit number mentioned on your V11 reminder form. Your vehicle registration number, name, and address. The road tax cancellation process is made easier by DVLA’s online service. You can select the scenario from the list provided and then follow the prompts that appear on your screen. There are different conditions for the options you choose, which may be: If the car is sold or transferred to someone else, you need to give the details of the new owner and other necessary paperwork to the DVLA. You need to declare the Car an off-road vehicle and update the DVLA. The DVLA should be updated if the car is scrapped. If the car is stolen, you should call the police about the theft, and the police will update the DVLA. The insurance should also be updated about the theft. The road tax can also be cancelled by other conventional ways, such as post or phone. Refund Eligibility and Process Below are the eligibility criteria for the road tax refund The amount of the refund will be calculated by the DVLA from the date you apply to cancel your road tax. This process is done automatically and does not need anything else from you. The road tax is paid annually in advance to the DVLA in the UK. The refund amounts will be for the remaining months of the year after you have applied for the tax cancellation. For example, if you apply for a road tax cancellation after six months in a year, you will get the refund for the remaining six months. The DVLA will not refund the charges paid, such as credit or debit card fees. If the tax is paid by direct debit, the DVLA cancels your regular payment. If the refund is requested on the first annual tax payment, the DVLA will calculate the difference between the first and second road tax payments and refund whichever is lower. Tax Refund Payment The amount of tax refund is paid by cheque by the DVLA. The tax refund will be sent to the name and address provided by the V5C logbook of your vehicle. The refund amount is received within 6 to 8 weeks of your request. If the name or address on the cheque is wrong, you can correct it by sending it back to the following address: Refund Section, DVLA, Swansea, SA99 1AL If the refund amount is not received within the mentioned period, you must inform the DVLA. Conclusion The road tax imposed by the DVLA is the tax that is paid by the car owner for the car that is used for driving. The amount of tax differs …

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what is taxable pay on payslip

What is Taxable Pay on Payslip?

18/04/2025tax , Tax Issues

Every employee requires knowledge about what is taxable pay on payslip as understanding taxable pay on a payslip enables you to determine which portion of your earnings are taxed plus the reasons behind specific deductions. Most workers review their payslips monthly but fail to interpret the listed information properly. Hence, what is taxable pay on a payslip? This article helps you to know about it, along with major differences from other terms mentioned on the payslip. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help about what is taxable pay on the payslip. What is Taxable Pay on a Payslip? Taxable pay includes workers’ wages that workers must surrender to the Income Tax authority and National Insurance for government revenue. Tax condition depends on the level of income that exceeds the Personal Allowance and spans through each tax band. Several kinds of income possess tax-exempt status, which prevents them from being counted as taxable pay. During the tax year running from April 6th 2024, to April 5th 2025, the Personal Allowance stands at £12,570. Individuals who earn beyond £100,000 must experience a reduction of £1 in their Personal Allowance for every £2 they surpass this amount. The Personal Allowance is not provided at all to individuals with income exceeding £125,140. People who meet Blind Person’s Allowance qualification criteria are able to raise their amount of tax-free earnings. The total sum that employers subtract from your gross pay to determine your taxable income is taxable pay. Numerous approved payments, together with specified deductions, determine the amount that constitutes your taxable pay. These deductions include: Payment to a Revenue-approved pension Scheme leads to gross pay deduction before the tax computation process begins. Your taxable income decreases when you make approved income protection scheme payments through the Permanent Health Benefit (Income Continuance) Scheme. Employees choose to exchange parts of their gross salary for employer-provided cars or enhanced pension arrangements through Salary Sacrifice Arrangements. Taxable pay decreases because employees choose salary sacrifice arrangements to reduce their income amounts. Employees who make contributions to their Personal Retirement Savings Account experience tax deductions prior to the calculation of tax amounts. A Retirement Annuity Contract (RAC) receives a deduction from gross pay before tax applies to the remaining amount. Your taxable income decreases when you make these deductions; therefore, your income tax obligations also decrease. Income Tax Rates and How Tax Is Calculated? People pay taxes according to the following breakdown after their Personal Allowance has been deducted. Up to £12,570 – No tax (0%) £12,571 to £50,270 – Taxed at 20% (Basic Rate) £50,271 to £125,140 – Taxed at 40% (Higher Rate) Over £125,140 – Taxed at 45% (Additional Rate) What is Gross Pay? Before any tax or pension deductions, gross pay represents the entire wages an employee receives. Employers must provide employees with their complete wages and salary amounts before taxes, pension contributions or deductions occur. Gross pay includes: Notional Pay describes all employer-contributed employee perks that extend beyond cash benefits, such as health insurance, together with company cars and additional non-cash benefits. The compensation package includes presents made through shares or stock options. The foundation of employee compensation exists in full wages, together with salaries that do not include salary deductions or pension payments. Before any reductions are applied, the employee’s complete earnings can be found in gross pay. Not all the money received under gross pay deductions falls into taxable income categories. Gross Pay vs. Taxable Pay: What’s the Difference? Different terminology relating to your earnings appears on your payslip. The important payment terms in payslips are Gross Pay and Taxable Pay. The two figures share some similarities but operate differently to determine the tax amount. The distinction between gross pay and taxable pay demands your immediate attention since it shows exactly how much tax your salary triggers. The system enables you to comprehend the added value of making pension scheme contributions and other authorised deductions. Financial planning becomes easier because this knowledge shows you what amount of pay remains after taxes and other deductions. A review of your payslip shows both gross pay and taxable pay amounts, so you can understand the calculation methods and salary administration. Taxable Pay Gross Pay After specified deductions, your gross pay produces the taxable amount, which becomes subject to taxation. Before all deductions take place, employees receive their full gross earnings as their total compensation It includes: A government-approved pension plan The approved Permanent Health Benefit (Income Continuance) plan maintains participation status with the tax authority. A Salary Sacrifice Arrangement A Personal Retirement Savings Account functions as a PRSA. A Retirement Annuity Contract (RAC) It includes: The employer provides non-cash benefits, which make up notional pay. Share-based payments (like company stock options) The full salary before any pension contributions or salary sacrifice deductions Income vs. Capital: Understanding the Difference The distinction of evaluating between income and capital receipts serves to determine whether the amount falls under Income Tax regulations or Capital Gains Tax rules. The way an amount appears provides no assurance on its tax classification because tax laws determine how it should be classified as income or capital. Types of Taxable Income Different types of earnings fall under tax law categories that must be taxed according to the Income Tax regulation. Employment income (wages, salaries, bonuses) Pension income Certain welfare benefits Trading income (self-employment profits) Property income (rental earnings) Savings and investment income Miscellaneous income Some types of payment cannot be easily assigned to either employment or capital receipts classifications. Compensation payments, together with grants, may fall within the scope of taxable income according to specific circumstances. Capital gains taxation through tax rate schemes exists for the following types of payments, which classify as capital income receipts: Receipts from the sale of an asset Receipts for the destruction of an asset Receipts for restrictive covenants Single payments are treated as capital by the majority, yet this status may not always hold true. All payments that substitute …

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do you pay tax when selling your house

Do You Pay Tax When Selling Your House?

12/04/2025tax , Tax Issues , Taxation

Do you pay tax when selling your house? Whenever you buy or sell something, you are liable to pay tax to the HMRC while residing in the United Kingdom. If you are unsure about the tax implications of selling your house, this article provides a comprehensive guide to all the tax liabilities you may encounter and answers the question, do you pay tax when selling your house?” Talk to our best accountants and bookkeepers in Croydon at CruseBurke. You will get instant help whether do you pay tax when selling your house. Do You Pay Tax When Selling Your House? Do you pay tax when selling your house? Property taxation is variable for different property types. There is a different tax percentage for houses, personal residence property, commercial property, and apartments. You need to have a strong knowledge of property sales/purchases if you are doing real estate business in the UK. In general, you should be updated about recent tax changes made by the UK government on selling your residence or other property. There are multiple options that you need to consider when selling your home. There might be some taxes that you need to pay when selling your house. The House You’re Selling is Your Main Residence In general, there is no capital gains tax (CGT) imposed when selling your main residence. This is due to private residence relief given by the UK government. On the other hand, if you inherited your main residence and you are planning to sell it, you don’t need to pay inheritance tax either, all because you have declared that property as your main residence. The House You’re Selling is Not Your Main Residence In the UK, if you are selling a house that is not your main residence, then you are liable to pay capital gains tax under rules set by the UK government. Moreover, if you have inherited the property you are selling, then you are liable to pay inheritance tax along with capital gains tax. Quite a toll on your pocket! Private Residence Relief You are exempt from capital gains tax (CGT) when you sell your home if all of the following conditions are met. You have only one home, and you have lived in it as your main residence since the day you bought it. You have not rented out any part of the home and used all of it as your main residence, but this excludes having a lodger. You have not used any portion of your home as your office or for any business purposes, for example, as a warehouse or temporary office. The total area of the home is also considered in private residence relief. The private residence relief will be applicable if the total area of the building or home is 5000 square meters in total. You do not intend to make a gain from this property; instead, you own it as your only main residence. If all the above-mentioned conditions are met, the private residence relief applies to the deal you are making. Work Out Your Gain If the above conditions are not met and you do not qualify for private residence relief, then you need to work out the tax amount on the amount gained when selling your home. The gained amount is the difference between the actual price and the amount earned while selling the home. You should use the market value for estimating the tax amount if It was gifted to you by friends or family. There are different taxation rules set by the UK government for gifted assets such as property, luxury and antique items, etc. If you sold the home at a price less than the price it was worth, just to help the buyer. You inherited the home, and you do not have enough knowledge of the inheritance tax value of the home. You owned the home before April 1982. If you’re not a resident in the UK for tax, you only pay tax on gains since 5 April 2015. Deducting Costs You can deduct the costs of buying, selling, or improving your property from your gain. These include: Amount paid to estate agents and solicitors as fees Costs of renovation and improvement works done at home, for example, extension of home, normal maintenance costs like decorating, painting, woodwork, flooring, ceiling works, etc. Some costs cannot be deducted, such as interest on a loan to buy your property. You should contact HM Revenue and Customs (HMRC) if you are unsure of the cost deduction process.  There is a set of special rules for assessing your gain if you sell a home that is on lease or your home is compulsorily purchased. Work Out If You Need to Pay Capital Gains Tax After assessing the gain amount on selling your home and the amount of relief you can claim from the HMRC, you need to work out if you are eligible to pay the capital gains tax. You cannot use the calculator if you: Sold other assets on which tax is charged in the same tax year, for example, shares or stocks, property or vehicles, etc. Reduced your share of a property that you still jointly own You are claiming tax reliefs from the HMRC other than private residence relief or letting relief are a company, agent, trustee or personal representative If you are eligible to pay the capital gains tax, then you must pay it within the time limit given by the HMRC, which is within 60 days of selling your property. Living Away from Your Home If you are living away from home and you intend to sell the property, then you may get less private residence relief compared to if you are residing in your home. However, you always get relief in tax relief for certain periods. The rules for paying tax are different if you are not a UK resident. Conclusion Do you pay tax when selling your house? There is always a certain amount of tax …

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do you pay taxes on stocks

Do You Pay Taxes on Stocks?

10/04/2025tax , Tax Issues

Do you pay taxes on stocks? Buying shares or stocks is a type of investment that most people are interested in. This is a potential side hustle that can generate lots of money or give you a huge loss. If you are interested in buying shares, then you must be aware of the taxation rules regarding buying shares and how they are taxed in the UK. This article will be helpful to you in learning do you pay taxes on stocks. Talk to our best accountants and bookkeepers in Croydon at CruseBurke. You will get instant help whether do you pay taxes on stocks. Do You Pay Taxes on Stocks in the UK? Do you pay taxes on stocks? Stocks, also commonly known as equity, represent that you are the owner of a fraction of the company you are buying stock from. Parts of stocks are called shares, which ensures that you are entitled to be the owner of a fraction of the company’s assets and profits equal to the number of shares you have. Companies sell their stocks on the stock exchange market and form the basis of many investors’ portfolios who are working individually in the field. The stock trade industry must comply with the rules set by the UK government. When are shares likely to be taxed? Stocks and shares you own are taxed in the UK. They are taxed at five different points, which are When you buy stocks or shares When the stocks start generating income When you come to sell the stocks When you give away your stocks When you pass them to your next generation The amount of tax charged on the shares depends on how they were purchased or held and the amount of income they are generating. What You Pay It On You are liable to pay capital gains tax if you are making a profit from the stocks you own and when you sell them or other investments. The taxable shares or investments include Shares that are not in an ISA or PEP units in a unit trust certain bonds (not including Premium Bonds and Qualifying Corporate Bonds) You need to work out your gain from selling the shares and if your gain comes under the capital gains tax allowance. If your gains are above the capital gains tax allowance, then you are eligible to pay the tax to the HMRC at the end of the financial year. If you are selling the shares of someone who has passed away, you have to mention this when reporting the shares to the HMRC. When You Do Not Pay It? You do not pay any tax on the stocks or shares you own if you gift it to your spouse, civil partner or a charity. There are other scenarios when you are exempt from capital gains tax, which are mentioned below: Shares you have declared as an ISA or PEP shares in employer Share Incentive Plans (SIPs) UK government gilts (including Premium Bonds) Qualifying Corporate Bonds employee shareholder shares – depending on when you got them Work Out Your Gain Like other tax scenarios, you will need to work out your gain on selling the stocks or shares. You will need to estimate your gain to know whether you need to pay capital gains tax or not. The gain on any asset so usually the difference between the actual price of the asset and the price at which it’s sold. Market Value If you are not about the gain on your shares, you should use the market value. Possible scenarios of using market value are: You gave these shares as a gift to your husband, wife, civil partner or a charity. You sold your shares for less than their actual value to help the buyer You inherited the shares, and you do not know their actual worth You owned your shares before April 1982 You got the shares through the schemes of your company, such as an employee share scheme If the shares you have were given or sold by someone who claimed gift holdover relief in the past, you should use the amount that person paid for the shares to calculate your gain on the shares. If you paid less than the giant turned out, use the amount you paid for the shares. Selling in Special Circumstances There are certain rules that you have to follow if you sell your shares under these circumstances: You bought shares at different prices and at different times in the company You bought shares through an investment club Shares came into your part after a company merger or takeover Shares you got through employee share schemes Jointly Owned Shares and Investments If you are dealing with shares that you own jointly with other people, then work out the gain for the portion you own instead of the whole value, as you are only liable to pay tax on your part. There are different rules of the UK government for share investment clubs. Deduct Costs After working out the gain, you should deduct the costs of buying or selling shares from your gain. These include fees, for example, stockbrokers’ fees Stamp Duty Reserve Tax (SDRT) when you bought the shares You should contact HMRC if you’re not sure whether you can deduct a certain cost. You may be able to reduce or delay paying Capital Gains Tax if you’re eligible for tax relief. Work Out If You Need to Pay Once you have finalised the gain amount then you should assess whether you need to pay the capital gains tax or not. You can calculate the amount yourself or use your tax calculator for help. You can use the calculator if you sold the shares that were the same type, acquired in the same company on the same date sold at the same time Conclusion Do you pay taxes on stocks? Well, shares or stocks are taxable assets. The amount of tax charged on the shares depends on the type of shares or the gain that …

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what is a negative income tax

Negative Income Tax (NIT): What It is, How It Works

19/08/2024tax , Tax Issues , Tax Saving Tips

Do you think you are the only one wondering what is a negative income tax? It is one of those queries that come up in tax discussions or even in your payslip, and people are confused. In simple words, a negative income tax (NIT), rather than contribute money to the government, low earners receive cash back to supplement their earnings. In the UK, it is a welfare mechanism by bridges the gap between someone’s actual income and a minimum guaranteed income by the UK government. This financial compensation is managed by reversing tax into a welfare subsidiary for people below a standard income threshold. It maintains an equitable living for all. We will break it down step by step in this blog, how it would work here, and clear up those confusing pieces, such as seeing a negative income tax on a payslip. Let’s gear up and start. Our team of professional members loves to hear out your business problems and find out the possible and suitable solutions quickly to the reporting in the UK. Contact us now. Understanding the Basics A negative income tax, sometimes also called NIT, is one way to help people with low incomes without the burden of loads of other benefits. Consider a scenario where earnings are less than a certain amount of money, to sustain yourself, including food and rent. The tax system is moving backwards for those in greatest need. In fact, the equation is usually: NIT = Threshold – (Real Income x TaxRate). The government does not tax you; instead, it pays you to cover the gap. The advantages are ease and motivation to work. On the other hand, it can be an expensive package; the estimates suggest millions of pounds on top of Treasury spending. Imagine a man has no income, he will get a negative income tax payment of £5,000. If that man gets a job and starts earning £5,000 yearly. He will be eligible to receive £2500 yearly. The moment his earnings reached £10,000 in a year, he would get zero NIT. What Is Negative Income Tax? Then what is a negative income tax? It is a system in which your tax rate is negative, i.e., you receive money instead of paying tax. So, say the break-even point is £20,000 a year and you make £10,000, the government may subsidise you by giving you part of the difference, say 50 per cent, so you would receive an additional £5,000. This is not free money, but it is meant to incentivise work. As you continue to earn more, the top-up reduces not abruptly like some benefits. This is unlike traditional taxes, where more money is paid by those who earn well. The emphasis with negative taxation is on lifting the bottom end. Advocates claim that negative taxation makes welfare easier and cheaper to administer and increases working incentives. Critics are concerned about how to fund it or individuals becoming over-dependent on handouts. This negative tax income scheme is combined with the current payroll, and hence it is reflected on your payslip as an adjustment or credit. No claims to be made separately; it happens automatically through HMRC. What is Negative Income? At the same time, you may be wondering, What is negative income? It is simply a situation in which your expenses or losses are more than your income, thus yielding a loss. The tax term refers to you claiming a refund or credit. To businesses, it appears as losses that are carried forward to cover future profits. It tends to arise in personal finance, particularly in the UK, in discussions of negative income tax, in which low or no income attracts a government financial compensation. Here are some examples to think about, which might make the system easier to understand: say your income is negative compared to a predetermined level, then the system ensures that it is positive. This is one of the reasons why negative income taxes are popular among economists. They deal directly with inequality without complicated regulations. What is a Negative Tax? In common language, it occurs when your payslip reflects that you were refunded based on a negative figure in the column of deducted tax. This occurs when you might have overpaid earlier in the year, maybe due to a change in tax code or a low income. As an example, when your income declines (such as Statutory Sick Pay), past overpayments are adjusted, reporting as negative tax income. HMRC adjusts your employer and thus your net payment increases. In more depth on the negative tax meaning, any situation in which tax is a credit and not a debit. Taxable income may be negative (causing refunds) when you are repaying salary to your boss. According to HMRC guidance, net earnings are not taxable, but you may claim relief when the net earnings are negative. In more general negative taxation, once again, it is the NIT concept. But on payslips, it is a practical correction. Negative income tax on payslip? It often means a tax rebate. Perhaps you have a bad tax code, or deductions have been reversed. Payroll software such as Onfolk may indicate negative income tax in the UK to correct any overpayment. On low wages, you may not reach the tax threshold, and you will get NIT. Negative Income Tax vs. Other Systems Let’s compare how Negative Income Tax (NIT) is better than what we already have: Consider Universal Basic Income (UBI) everyone receives a flat rate payment, no questions. It is specifically designed to pay only those below the line, and it can also be less expensive. UBI may be more just, but it may increase taxes across the board. Universal Credit is a negative income tax in the UK. It supplements low earnings, but it has conditions associated with job-seeking. The pure form of NIT would abandon those guidelines, and it would be more permissive. Then there is the Living Wage push, but the NIT supporters say it is better …

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council tax on vacant property

Do You Pay Council Tax on Vacant Property?

15/08/2024tax , Tax Issues , Tax Saving Tips , Taxation

If you’re a property owner in the UK, you’re likely familiar with council tax. This is a mandatory payment that funds local services like waste management, policing, and education. But what happens when a property is left vacant? Do you still need to pay council tax? The answer isn’t always straightforward. With various exemptions, discounts, and special cases to navigate, understanding council tax on vacant property can be a daunting task. Even if you’re a landlord dealing with a gap between tenants, a homeowner who’s inherited a property, or simply someone who’s renovating a property. It’s essential to grasp the rules surrounding council tax on vacant properties. In this discussion, we’ll delve into the ins and outs of council tax on vacant properties in the UK. You are exploring the standard rules, exemptions, discounts, and special cases that may apply. By the end of it, you’ll be equipped with the knowledge to manage your council tax obligations with confidence, even when dealing with vacant properties. So, let’s dive in and uncover the intricacies of council tax on vacant properties in the UK. If you seek professional help to learn more about the council tax on vacant property, why wander somewhere else when you have our young and clever team of professionals at CruseBurke? Do You Pay Council Tax on Vacant Property? When a property in the UK is left vacant, the rules surrounding council tax can be complex and confusing. In general, council tax is still payable on a vacant property, but there are some important exceptions and discounts to be aware of. If a property is left empty, the owner is usually liable for council tax, but the amount payable may vary depending on the circumstances. What are Exemptions and Discounts in this Regard? Exemptions apply to certain types of vacant properties, including: Properties undergoing major repairs or renovation work Properties left empty by someone who has gone into care Properties left empty due to bereavement or divorce Properties that are empty because they’re impossible to occupy Properties that are empty and owned by a charity If your vacant property doesn’t qualify for an exemption, you may still be eligible for a discount on your council tax bill. Discounts vary depending on the local authority, but here are some common ones: Furnished but unoccupied properties: 10-50% off the standard rate Unfurnished but unoccupied properties: 0-50% off the standard rate Properties occupied by students or members of the armed forces: 10-50% off the standard rate If a property is furnished but unoccupied because the owner is living in care or is severely mentally impaired, you may be eligible for a Class C discount. This discount is usually 50% off the standard rate. If you own a vacant property that’s not your main home, you may be eligible for a second home discount. This discount varies by authority but is usually around 10-50% off the standard rate. To apply for an exemption or discount, you’ll need to contact your local authority and provide evidence to support your claim. This may include documents like renovation plans, care home contracts, or proof of ownership. Don’t assume you’re eligible. Always check with your local authority to see what exemptions and discounts are available. What are the Charges for Long-Term Vacant Properties? If you own a property in the UK that’s been vacant for an extended period, you may be charged a “long-term empty premium” or “empty homes premium”. This is a surcharge on top of the standard council tax rate. It’s designed to encourage property owners to bring their properties back into use. The definition of “long-term” varies depending on the local authority, but it’s usually considered to be: Over 2 years (for most authorities) Over 5 years (for some authorities) The long-term empty premium is usually calculated as a percentage of the standard council tax rate. The rate varies depending on the authority, but common rates include: 50% of the standard rate (for properties empty over 2 years) 100% of the standard rate (for properties empty over 5 years) 200% of the standard rate (for properties empty over 10 years) The premium is calculated based on the banding of the property (A-H). For example, if the standard council tax rate for a Band D property is £1,500, the long-term empty premium might be: £750 (50% of £1,500) if the property has been empty over 2 years £1,500 (100% of £1,500) if the property has been empty over 5 years Some properties may be exempt from the long-term empty premium, including: Properties undergoing major repairs or renovation work Properties left empty by someone who has gone into care Properties left empty due to bereavement or divorce To avoid paying the long-term empty premium, you can: Bring the property back into use Apply for an exemption or discount Sell the property Always check with your local authority for specific rules and rates regarding long-term empty properties. Are There any Special Cases? Here is an explanation of special cases in this regard. Military and Diplomatic Exemptions If you’re a member of the armed forces or a diplomat, you may be exempt from paying council tax on a vacant property. This includes: Properties left empty by service personnel on active duty Properties left empty by diplomats or foreign nationals with diplomatic immunity Deaths and Bereavement In the event of a death, you may be eligible for a council tax exemption or discount on a vacant property. This includes: Properties left empty by someone who has passed away Properties left empty by someone who has inherited a property and is dealing with probate Tenancy and Rental Exemptions Certain types of tenancies or rentals may also be exempt from council tax on a vacant property. This includes: Properties rented out to students or members of the armed forces Properties rented out under an assured shorthold tenancy (AST) Care and Disability Exemptions If you or a family member require care or have a disability, you may be exempt from …

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