Among the G20 countries, the UK is committed to coming up with the most comprehensive and competitive tax regime. Their taxes are structured to attract business. Their corporate tax rate is currently sitting at 19%. This is one of the best tax rates in the world and has seen the UK become the sixth-largest trading nation in the world. With this corporate tax, the UK is now a favorable location for headquarters to multinational companies and regional business hubs.
Apart from the banking sector, oil & gas, tonnage tax regime, and life insurance company regime, there are no unique tax regimes in the UK. All companies in all sectors are similar when it comes to corporate tax rates and rules. Treatment will change with regard to size, R&D credits, and transfer pricing. Large companies will need to meet some additional compliance and reporting requirements and HMRC has these structures in place where they are arranged by the magnitude of the company’s operations.
Who is responsible for tax collection in the UK?
HMRC is the tax authority in the UK and its responsibility is to collect tax and manage tax in the UK. They also collect most student loan repayments which is one of their other responsibilities in government engagements not involving tax collection. Such repayments are calculated as deductions and this is the reason they collect the student loan repayments for convenience.
There is an HMRC charter which you need to read if you are a citizen of the UK. This charter will explain to you the standards of behavior and values that the organization should adhere to in its dealings. In this charter, there is the Personal Information Charter that will explain the personal information collected by HMRC and how they use it.
You can take the help of a tax lawyer in the UK who has expertise in the full range of HMRC civil tax investigations.
Corporate Tax in the UK
This is a tax collected from profits that a corporation makes. Most of the countries around the globe tax profits from corporations but the rates differ. These corporate taxes can be a problem for economic growth but they can be eased by implementing lower rates and better capital allowances.
There are different tax regimes for different markets in the UK; all companies are required to pay a corporate tax of 19% on income tax profits. Some companies use a different regime and these are companies in the banking sector industry, tonnage industry, Life Insurance, and oil & gas.
Corporate tax is payable by all companies registered in the UK or foreign companies with branches in the UK. This also applies to co-operatives, clubs, offices, or any self-employed persons operating as limited liability companies. All profits made by the entities mentioned above should be taxed. If a company is not registered, then they will not pay corporate tax but they will pay income tax on profits from the business. The kind of business you operate will determine the corporate tax rate you need to pay.
Individual Taxes in the UK
Individual tax is the biggest source of income for governments. Most of the government operations in the UK are funded by taxes raised from household incomes. The amount an individual contributes as tax is dependent on the amount of income the individual gets. The more money you make the more tax you get to pay.
There are payroll taxes too which are flat-rate and levied on wage income in addition to the income tax. Revenue generated from these kinds of taxes is meant to fund insurance programs like pension programs, health insurance, and unemployment insurance.
These are the taxes that are applied to individuals and businesses. For assets like real estate and other kinds of property, the taxes are paid at defined intervals and this is most of the time annually. This tax is dependent on the value of the taxable property.
There are two forms of property tax in the UK. One of them is the stamp duty that is determined by the value of the property in question. For residential properties with a value of over £125,000 or non-residential land and properties of over £150,000 one has to pay Stamp Duty Land Tax (SDLT). The other form of property tax is the council tax which is determined by each municipality after assessing the properties in the jurisdiction every year. After the assessment the tax applicable is determined.
Paying Taxes in the UK is a serious matter like in any other country since it is the source of revenue to finance government operations. From our guide, you have learned the different types of taxes that have to be paid in the UK and the rates that apply. There is more information when it comes to the UK taxation system but we have covered some of the most important ones as well as those that will apply to almost all individuals.