Facebook Twitter Linkedin Instagram Pinterest
Instant Quote
Call Me Back
main types of taxes

What are the Main Types of Taxes in the UK?

03/03/2023tax , Tax Issues , Tax News and Tips , Tax Saving Tips , Taxation

It has been observed that the tax code in the UK is most extended since the tax year 2009. It will not be wrong to presume that tax affairs are one of the most complex matters here. This is due to the fact that the tax authorities and system is designed in a straightforward way. One of the main yet difficult parts of tax rules is that even spouses are considered separate entities. Every individual whether living in a civil partnership, married, or single is being taxed individually according to the tax law. Then there are a few exceptions observed as well. As a beginner in tax affairs in the UK, you must gather basic information regarding the main types of taxes in the UK.

Moreover, this is imperative to mention here that when you will begin to pay taxes, you will have to go through three different stages. There is the involvement of the central government, local government, and the devolved government. The tax year is on the 6th of April and ends on the 5th of April and it is also known as the fiscal year. Moreover, there are main types of taxes that are mostly implemented for a resident of the UK. We have covered everything related to these types in this guide. Let us get started with the discussion to learn more.

 

Reach out to our smart and clever-minded guys to get an understanding of the main types of taxes in the UK. We will help to understand your queries instantly.

 

What are the Main Types of Taxes in the UK?

Usually there considered to be six main types of taxes that are implemented on individuals when living as a UK resident. This involves the tax liabilities of paying the national insurance contribution, value-added tax, excise duties, corporation tax, stamp duty, and income tax. The relevant details are explained below for further understanding.

 

1- National Insurance Contribution

National insurance is paid by individuals in the UK to ensure that they qualify for state pension and some other certain benefits from the government. National insurance contribution is mandatory to pay for the ones who are more than the age of 16 and earn to a certain limit. In the case of being self-employed, the profit has to be more than a certain amount to bring in the liability of paying the national insurance contribution.

Moreover, there are different classes of national insurance contributions. This explains that not every individual is paying the same amount. The decisive role is played by the amount you earn and what is your employment status in this regard. You must also ensure that there are no gaps in the record of your past payments of national insurance contributions.

 

2- Value-Added Tax (VAT)

Value-added tax is also known as a consumption tax. This tax is also a great source of government income just like the national insurance income tax is. The standard rate of VAT which is 20% is applied to several common things in the UK. The fair of taxis, pushchairs, prams, chocolates and alcoholic drinks are a few examples of which VAT is implemented with a standard rate normally.

However, the rates of VAT on the mobility of elders, solid fuel, heating oil, gas, electricity, car seats, and oil is a little lower than other things. There is a category of zero rates items well which includes poultry, meat, fruits, vegetables, and household water. Then comes the things that are exempted from VAT.

 

3- Excise Duties

Excise duty is normally charged on things like vehicles, betting, tobacco, and alcohol. The individuals who are involved in producing these items are also charged excise duty. Normally the excise duty tax is implemented on the final price for sale. The consumer will have to pay the excise duty indirectly to the government in the UK. There is a separate form for the excise duty as well. So it is better to be aware of the standard rates of excise duty to know what exactly are you paying in form of tax indirectly to the government.

 

4- Corporation Tax

A corporation tax is known to be a tax that is implemented on the number of profits of a company. This explains that if you are involved in carrying out business through a limited company, a foreign company that has a UK branch, or any club corporation, you will be liable to pay corporation tax. There is a standard rate of corporation tax as well which could even come down in certain situations. This depends on the kind of business you are carrying out that will decide how much you will pay as a corporation tax for your limited company.

 

5- Stamp Duty

This tax is known as the stamp duty land tax. If you are an individual who is interested in buying a piece of land or a party in the UK that has prices over a certain figure, you will have to pay stamp duty land tax. In the case of buying a first home in the UK, you might get entitled to some discounts in this regard. In some cases of buying the first home, you will not have to pay any tax at all.

 

6- Income Tax

This kind of tax is implemented on your income directly. How much amount you will pay in form of income tax depends on the figure you are learning that is over the amount of your personal allowance. You will have to consider the fact about which tax band you belong to according to your earnings. There are some cases where you can even apply for income tax relief.

 

The Bottom Line

Now that we have gathered a fair amount of information about what are the main types of taxes in the UK, we can bring the discussion towards wrapping up. There are main six types of taxes that are normally implemented according to your unique situation when you are a resident of the UK. Since the tax affairs and relevant rules are quite strict in the UK, you do not find any escape from paying the tax. We hope these few minutes of reading will help you to develop a better understanding of what are tax affairs and how to handle them efficiently as a UK resident.

 

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.

 

Disclaimer: The information about the main types of taxes in the UK provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.

     

Related post

can you pay corporation tax in instalments
Can You Pay Corporation Tax in Instalments?

11/12/2024corporation tax

Can you pay corporation tax in instalments? Whether you own a large or a small business, the profits you’re earning through your business come under corporation tax paid to HMRC in the UK. One of the primary responsibilities of the company director is to ensure that the records are accurately maintained and accounts are filed. This will allow reporting of accurate profits of a business to HMRC, leading to determining the right amount of tax. Sometimes, this procedure becomes more stressful once a director realises that the tax deadline cannot be met. If you find yourself in such a situation, don’t worry; we have got you covered. This guide will help you through the process of understanding what to do if you cannot pay your corporation tax bill on time and if can you pay corporation tax in instalments. Carry on reading to find more. Get in touch with our young, clever, and tech-driven professional accountants if you want to choose the best accounting services. Understanding Corporation Tax and Large Companies In simple words, the corporation tax is referred to as a corporate tax that all limited companies that are carrying out business activities in the UK pay to HMRC on their profitable earnings. The companies are required to get themselves registered with HMRC to give access to their earnings and profits so that the accurate tax bill can be determined. The director of a company knows that they got three months after the trading of business activities begin to get registered for the corporation tax. In case they do not get registered within this time limit, there can be legal consequences that a beginner in business will never want to face, along with other challenges. Mostly, the small businesses make the director obliged to ensure that all the corporation taxes are paid on time. However, in the case of large companies, there is normally an in-house team available to work on the finances and accounts. They ensure the tax payments along with seeing other financial and accountancy matters. Any of this does not matter if the businesses ensure that taxes are paid on the deadline. Moreover, only the limited companies that are generating profits are obliged to pay corporation tax on profitable amounts. However, if you are running the company on losses, you can inform HMRC, and the corporation tax will be exempted. In the case of sole traders, they are obliged to pay income tax on the earned profits from the business but not corporation tax. What If You Cannot Pay Corporation Tax? Sometimes, a business situation comes up that makes you unable to pay corporation tax anywhere near the deadline. The first and foremost thing to do in such a situation is to get in touch with HMRC to notify. HMRC is always available to listen to the concerns of the businesses that are struggling in the UK and making possible compromises, but you will have to be upfront with HMRC forts. If you ignore the reminders and tax bills from HMRC, your business can be in hot water and face consequences. There can be a time-to-pay deal by HMRC that will allow you to pay what you owe within a set period. This period is predetermined by HMRC in the UK. There will be a winding-up petition for your business if you fail to pay the corporation tax again. In case you are not being able to understand or handle the tough situation, you can get help from experts as well. Seek professional help to come out of this business situation. Can You Pay Corporation Tax in Instalments? In certain business situations where you need more time to gather your funds to clear your corporation taxes, you can ask HMRC, ‘Can you pay corporation tax in instalments?’ If the conditions are met, HMRC can offer you an instalment plan. This plan is normally known as the Time To Pay Arrangement or TTP. This will lead your business to settle the payments in instalments over an agreed period between HMRC and you. HMRC will look back into the history of your tax payments and paying debts to ensure that you’re worthy of getting this favour. If they are convinced that your business is in a position to make the repayments, there will be a TTP arrangement for your business.  However, there are certain conditions to qualify for this. You need to act swiftly before HMRC opts for the winding-up petition. Ensure that the TTP arrangement is submitted in written form. This should accompanied by supporting documents that can prove that you are incapable of paying corporation tax in one-time payments and that you can also manage the instalments. You need to be very mindful when deciding on your corporation tax instalments because the consequences will be even worse if you fail to pay the instalments of your corporation tax. What are the Penalties on Instalments? If you’ve been granted the instalment favour by HMRC and fail to pay your corporation tax instalments, you’ll face penalties and interest on the overdue amount. When you miss an instalment payment, you’ll receive an initial penalty of a certain percentage of the overdue amount. If you still haven’t paid the overdue amount, you’ll start receiving daily penalties. HMRC charges interest on overdue amounts. Interest accrues daily on the overdue amount, starting from the original due date. If you’ve made a serious default, such as deliberately withholding payment or providing false information, you may face an additional penalty. In case you’re struggling to make payments, contact HMRC as soon as possible to discuss your options. Ensure you make your instalment payments on time to avoid penalties and interest. Consult with a tax advisor or accountant to ensure you’re meeting your corporation tax obligations and taking advantage of available tax reliefs. Verify the details on the penalty notice, including the amount and due date. Pay the penalty amount by the due date to avoid further interest and penalties. If you disagree with …

Read more
stamp duty on gifted property
Do You Pay Stamp Duty on Gifted Property?

31/01/2024tax , Tax Issues , Tax News and Tips , Tax Saving Tips , Taxation

The rules surrounding stamp duty on gifted property in the UK can be complex, with different rates of tax applying to different types and values of property. One area where stamp duty can be particularly complex is in the transfer of property as a gift. In this instance, the rules surrounding stamp duty can be unclear and can depend on a range of factors, including the relationship between the donor and the recipient and the value of the property. Given the complexity of the rules surrounding stamp duty on gifted property in the UK, it is important to seek the advice of a qualified professional, such as a lawyer or financial advisor, who can guide you through the process and ensure that you fully understand your tax obligations.   Reach out to one of our professionals to get to know about your tax liabilities in the Uk. Get in touch and you will be provided instant professional help!   Will I have to Pay Stamp Duty on Gifted Property? If a property is gifted, i.e. given to another person for free, stamp duty may still be required to be paid. In the UK, the rules for stamp duty on gifted property can be complex and depend on a range of factors, including the relationship between the donor and the recipient, the value of the property, and the purpose of the gift. One common scenario where stamp duty may need to be paid on a gifted property is on the transfer of a property from a parent to a child. In this case, stamp duty may be due at the time of the transfer, based on the current market value of the property. There may also be additional taxes to consider, such as inheritance tax, depending on the overall value of the estate. It is important to note that the rules for stamp duty on gifted property in the UK can be complex, and it is always recommended to seek the advice of a qualified professional, such as a lawyer or financial advisor, who can guide the specific circumstances of the transaction. By working with a professional, individuals and families can ensure that they fully understand their tax obligations and can take appropriate steps to minimise their tax liability.   Can I Still Live There? If a property has been given as a gift, then the donor (the person giving the gift) will have given up their ownership of the property. This means that the recipient (the person receiving the gift) becomes the new owner of the property. Once the property has been transferred, the recipient can decide what to do with the property, including renting it out, living in it, or selling it. If the property has been given as a gift but the recipient plans to continue living in the property, it is important to consider the implications for inheritance tax. In general, if the recipient lives in the property as their main residence, and it is their only property, then there may be no charge to inheritance tax. However, it is important to note that the rules for inheritance tax can be complex and can depend on a range of factors. It is always recommended to seek the advice of a qualified professional who can guide the specific circumstances of the transaction. By working with a professional, individuals and families can ensure that they fully understand their tax obligations and can take appropriate steps to minimise their tax liability.   What If You’re Left Land or Property in a Will? If someone leaves you land or property in their will, you will become just as if it had been gifted to you. The law of succession says that when someone dies, their estate passes to their beneficiaries (i.e. people who stand to inherit from them) by their will or, if there is no will, by the inheritance laws of the jurisdiction in which they died. This means that the property will be transferred to the beneficiaries, who can then do what they wish with it. It is important to note that, depending on the value of the property, taxes may be due upon transfer. For example, in the UK, Stamp Duty on gifted property or Land Tax is payable on the transfer of property upon death. In some cases, the beneficiaries may also be liable for Inheritance Tax on the property transferred to them.   What If You’re Given Property as a Gift? If you are given a property as a gift, you will become the new owner of the property. The legal process for transferring the property will depend on the laws of the relevant jurisdiction, but in general, the donor will sign over the property to you as a gift and you will take ownership. It is important to note that there may be tax implications for both the donor and the recipient, depending on the value of the property and the relationship between the donor and the recipient. For example, in the UK, Stamp Duty Land Tax may be payable on the transfer of the property, and the donor may be liable for Gift Tax on the amount of the gift. Additionally, if the transfer of the property is made in connection with the death of the donor, Inheritance Tax may be payable on the transfer of the property.   The Bottom Line To wind up the discussion on stamp duty on gifted property, we can say that stamp duty is a tax that may be due when buying or selling property in the UK. When a property is gifted, there may still be stamp duty due, depending on the circumstances of the gift. The rules for stamp duty on gifted property in the UK may be complex, and it is always recommended to seek the advice of a qualified professional, such as a lawyer or financial advisor, who can guide the specific circumstances of the transaction. In addition to seeking professional advice, it …

Read more

Need Help with Accounting? We’ve Got You Covered!

Running a business is hard. Let us take care of your accounting so you can focus on what matters most. Our services include:

  • VAT Returns
  • Payroll
  • Bookkeeping
  • Company Formation
  • Self Assessment Tax Returns
  • CIS Returns
Get an Instant Quote