HOME

TheInfoList




Taxation in the United Kingdom may involve payments to at least three different levels of government:
central government A central government is the government A government is the system or group of people governing an organized community, generally a state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a month ...
(
Her Majesty's Revenue and Customs , type = Non-ministerial government department Non-ministerial government departments (NMGDs) are a type of Departments of the Government of the United Kingdom, department of the Government of the United Kingdom that deal with matters for whic ...
), devolved governments and
local government Local government is a generic term for the lowest tiers of public administration Public administration is the implementation of government policy Public policy is a course of action created and/or enacted, typically by a government ...
. Central government revenues come primarily from
income tax An income tax is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelate ...
,
National Insurance National Insurance (NI) is a fundamental component of the welfare state in the United Kingdom Welfare is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social s ...
contributions,
value added tax A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law L ...
,
corporation tax A corporate tax, also called corporation tax or company tax, is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax ...
and fuel duty. Local government revenues come primarily from grants from central government funds,
business rates in England Business rates in England, or non-domestic rates, are a tax on the occupation of non-domestic property (National Non-Domestic Rates; NNDR). Rates Rate or rates may refer to: Finance * Rates (tax), a type of taxation system in the United Ki ...
,
Council Tax Council Tax is a taxation, local taxation system used in England, Scotland and Wales. It is a Property tax, tax on domestic property, which was introduced in 1993 by the Local Government Finance Act 1992, replacing the short-lived Poll tax (Great ...
and increasingly from fees and charges such as those for on-street parking. In the
fiscal year A fiscal year (or financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. It is also used for financial report Financial statements (or financial reports) are formal ...
2014–15, total government revenue was forecast to be £648 billion, or 37.7 per cent of
GDP Gross domestic product (GDP) is a monetary In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left corner">174x174px Money is any ...
, with net taxes and National Insurance contributions standing at £606 billion.


History

A uniform
Land tax A land value tax or location value tax (LVT), also called a site valuation tax, split rate tax, or site-value rating, is an ''ad valorem tax, ad valorem'' levy on the unimproved value of land (economics), land. Unlike property taxes, it disregar ...
, originally was introduced in England during the late 17th century, formed the main source of government revenue throughout the 18th century and the early 19th century.
Stephen Dowell Stephen Dowell (1 May 1833 — 28 March 1898) was an English historian and legal writer, best known for his history of taxation in England. Biography Dowell was born on 1 May 1833, in Shorwell on the Isle of Wight The Isle of Wight () is ...
, ''History of Taxation and Taxes in England'' (Routledge, 2013)


Napoleonic wars

Income tax was announced in
Britain Britain usually refers to: * United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' use Britain as a synonym for the United ...

Britain
by
William Pitt the Younger William Pitt the Younger (28 May 175923 January 1806) was a prominent Tory A Tory () is a person who holds a political philosophy Political philosophy or political theory is the philosophical Philosophy (from , ) is the st ...

William Pitt the Younger
in his budget of December 1798 and introduced in 1799, to pay for weapons and equipment in preparation for the
Napoleonic Wars The Napoleonic Wars (1803–1815) were a series of major World war, global conflicts pitting the First French Empire, French Empire and its allies, led by Napoleon, Napoleon I, against a fluctuating array of Coalition forces of the Napoleonic W ...
. Pitt's new graduated (progressive) income tax began at a levy of 2
old pence The pre-decimal penny (1d) was a coin A coin is a small, flat, (usually, depending on the country or value) round piece of metal A metal (from Ancient Greek, Greek μέταλλον ''métallon'', "mine, quarry, metal") is a material tha ...
in the
pound Pound or Pounds may refer to: Units * Pound (currency) A pound is any of various units of currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" in the most specific sense is money Im ...
(1/120) on annual incomes over £60 (equivalent to £ as of ), and increased up to a maximum of 2
shilling The shilling is a historical coin, and the name of a unit of modern currencies A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" in the most specific sense is money Image:National-D ...
s (10 percent) on annual incomes of over £200. Pitt hoped that the new income tax would raise £10 million, but receipts for 1799 totalled just over £6 million. Income tax was levied under five schedules. Income not falling within those schedules was not taxed. The schedules were: * Schedule A (tax on income from United Kingdom land) * Schedule B (tax on commercial occupation of land) * Schedule C (tax on income from public securities) * Schedule D (tax on trading income, income from professions and vocations, interest, overseas income and casual income) * Schedule E (tax on employment income) Later, Schedule F (tax on United Kingdom dividend income) was added. Pitt's income tax was levied from 1799 to 1802, when it was abolished by
Henry Addington Henry Addington, 1st Viscount Sidmouth, (30 May 175715 February 1844) was a British Tory The Tories were a political faction Politics (from , ) is the set of activities that are associated with making decisions in groups, or othe ...

Henry Addington
during the
Peace of Amiens The Treaty of Amiens (French language, French: ''la paix d'Amiens'') temporarily ended hostilities between French First Republic, France and the United Kingdom of Great Britain and Ireland, United Kingdom at the end of the War of the Second Coa ...
. Addington had taken over as prime minister in 1801. The income tax was reintroduced by Addington in 1803 when hostilities recommenced, but it was again abolished in 1816, one year after the
Battle of Waterloo The Battle of Waterloo was fought on Sunday, 18 June 1815, near Waterloo Waterloo most commonly refers to: * Battle of Waterloo, a battle on 18 June 1815 in which Napoleon met his final defeat :* Waterloo, Belgium, a municipality in Belgium fr ...

Battle of Waterloo
. Considerable controversy was aroused by the
malt Malt is germinated cereal grain that has been dried in a process known as "malting Malting is a process of steeping Steeping is the soaking of an organic solid, such as leaves, in a liquid (usually water) to extract flavours or to soft ...
, house,
windows Microsoft Windows, commonly referred to as Windows, is a group of several proprietary {{Short pages monitor Any income above the personal allowance is taxed using a number of bands:


England, Wales and Northern Ireland

Taxpayer's income is assessed for tax according to a prescribed order, with income from employment using up the personal allowance and being taxed first, followed by savings income (from interest or otherwise unearned) and then dividends. Foreign income of United Kingdom residents is taxed as United Kingdom income, but to prevent
double taxation Double taxation is the levying of tax by two or more jurisdictions on the same income (in the case of income taxes), asset (in the case of Wealth tax, capital taxes), or financial transaction (in the case of sales taxes). Double liability may be m ...
the United Kingdom has agreements with many countries to allow offset against United Kingdom tax what is deemed paid abroad. These deemed amounts paid abroad are not necessarily as much as actually paid. Rental income on a property investment business (such as a
buy to let Buy-to-let is a British phrase referring to the purchase of a property specifically to let out, that is to rent it out. A ''buy-to-let'' mortgage is a mortgage loan A mortgage loan or simply mortgage () is a loan In finance, a loan is th ...
property) is taxed as other savings income, after allowing deductions including mortgage interest. The mortgage does not need to be secured against the property receiving the rent, subject to a maximum of the purchase prices of the property investment business properties (or the market value at the time they transferred into the business). Joint owners can decide how they divide income and expenses, as long as one does not make a profit and the other a loss. Losses can be brought forward to subsequent years.


=Current rates

= This table reflects the removal of the 10% starting rate from April 2008, which also saw the 22% income tax rate drop to 20%. From April 2010, the Labour government introduced a 50% income tax rate for those earning more than £150,000. Income threshold for high taxation rate on income was decreased to 32,011 in 2013

The coalition government raised this allowance in years following 2014, and the 50% tax bracket was reduced to its current 45% rate. Note: For every £2 earned above £100,000, £1 of the personal allowance is lost. This means for incomes between £100,001 and £125,140 the marginal income tax rate is 60%.


Scotland

Since 2017 the Scottish Parliament has had the power to set the tax band thresholds (excluding the personal allowance) as well as the rates on all non-savings and non-dividend income of Scottish taxpayers. †Assumes individuals are in receipt of the Standard UK Personal Allowance. ††The Personal Allowance reduces by £1 for every £2 earned over £100,000. This means for incomes between £100,001 and £125,140 the marginal income tax rate is 61.5%.


Exemptions on investment

Certain investments carry a tax favoured status including: * Gilts, UK Government Bonds (Gilts) While all income is taxable, gains are exempt for income tax purposes. *
National Savings and Investments National Savings and Investments (NS&I), formerly called the Post Office Savings Bank and National Savings, is a state-owned savings bank in the United Kingdom. It is both a non-ministerial government department and an executive agency of HM Treasu ...
Certain investments via the state owned National Savings scheme are not subject to tax including Index linked Certificates (up to £15,000 per issue) and
Premium Bonds A Premium Bond is a lottery bond issued by the United Kingdom government The Government of the United Kingdom, domestically referred to as Her Majesty's Government, is the central government of the United Kingdom of Great Britain and Nort ...
, a scheme that issues monthly prizes in place of interest on individual holdings up to £50,000. *
Individual Savings Account An individual savings account (ISA; ) is a class of retail investment arrangement available to residents of the United Kingdom. First introduced in 1999, the accounts have favourable tax status. Payments into the account are made from after-tax in ...
s (ISAs) Interest is paid tax-free, while dividends are paid along with a tax credit to the investor which can then be offset against dividend tax due. For a basic rate tax payer this means they have no tax to pay on a dividend. There is no overall limit on how much a person can have invested in ISA accounts, but additional investments are currently limited to £20,000 per person per year, either in cash funds,
mutual fund A mutual fund is a professionally managed investment fund An investment fund is a way of investment, investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the ri ...
s (Units Trusts and OEICs), or individual self-selected shares. *
Pension A pension (, from Latin Latin (, or , ) is a classical language A classical language is a language A language is a structured system of communication Communication (from Latin ''communicare'', meaning "to share" or "to be ...

Pension
funds These have the same tax treatment as ISAs in terms of growth. Full tax relief is also given at the individual's marginal rate on contributions or, in the case of an employer contributions, it is treated as an expense and is not taxed on the employee as a benefit in kind. Aside from a tax free lump sum of 25% of the fund, benefits taken from pension funds are taxable. * Venture Capital Trusts These are investments in smaller companies or funds of holdings in such companies over a minimum term of five years. These are not taxable and qualify for 30 percent tax relief against an individual's income. * Enterprise Investment Schemes A non-taxable investment into smaller company shares over three years that qualifies for 30 percent tax relief. The facility also allows an individual to defer capital gains liabilities (these gains can be stripped out in future years using the annual CGT allowance.) * Seed Enterprise Investment Schemes A non-taxable investment into smaller company shares over three years that qualifies for 50 percent tax relief. The facility also allows an individual to defer capital gains liabilities (these gains can be stripped out in future years using the annual CGT allowance.) * Insurance bonds These include offshore and onshore investment bonds issued by insurance companies. The main difference between the two is that corporation tax paid by the onshore bond means that gains in the onshore bond are treated as if basic rate tax has been paid (this cannot be reclaimed by zero or starting rate tax payers). With both versions up to 5 percent for each complete year of investment can be taken without an immediate tax liability (subject to a maximum total of 100 percent of the original investment). On this basis, investors can plan an income stream while deferring any chargeable withdrawals until they are on a lower rate of tax, are no longer a United Kingdom resident, or their death. * Offshore trusts and companies Trusts can be offshore if all trustees are non-resident. Such trusts can own foreign-operated companies. Corporation tax rates can be lower in some countries and where we still have double taxation treaties. However, since anti-avoidance rules have been introduced for taxation of trusts, these structures are not advantageous for someone who will remain resident.


Exceptions

Many holdings and income from them are exempt for "historical reasons". These include: * Special, low tax arrangements for the monarchy, such as the arrangement used by the
British Royal Family The British royal family comprises Queen Elizabeth II and her close relations. There is no strict legal or formal definition of who is or is not a member of the British royal family. Many members support the Queen in undertaking public engag ...
to avoid inheritance taxation. * Reduced income tax for special classes of person. For instance non-doms, who are resident in the United Kingdom but not "domiciled", are not subject to UK income tax on their non-UK income provided the remittance basis of taxation is claimed (or applies automatically) and the non-UK income is not remitted to the UK. After seven years of tax residence, the remittance basis can carry a substantial tax charge and UK residents will usually be deemed to be domiciled of the UK after fifteen years of residence without a gap of five years. * An
Act of Parliament Acts of parliament, sometimes referred to as primary legislation, are texts of law passed by the Legislature, legislative body of a jurisdiction (often a parliament or council). In most countries, acts of parliament begin as a Bill (law), bill, wh ...
to protect the
Earl of Abingdon The Grant of deed of Arms of Earl of Abingdon, 1682 V&A Museum no. W.25:1 to 3-1987 Earl of Abingdon is a title in the Peerage of England The Peerage of England comprises all peerages created in the Kingdom of England before the Act of Uni ...
and his "heirs and assignees" from paying income tax on the tolls on the . * The income of charities is usually exempt from United Kingdom income tax.


Inheritance tax

Inheritance tax An inheritance tax is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interre ...
is levied on "transfers of value", meaning: # the estates of deceased persons; # gifts made within seven years of death (known as
Potentially Exempt Transfer In the United Kingdom, Inheritance Tax is a transfer tax. It was introduced with effect from 18 March 1986, replacing Capital Transfer Tax. History Prior to the introduction of Estate Duty by the Finance Act 1894, there was a complex system of ...
s or "PETs"); # "lifetime chargeable transfers", meaning transfers into certain types of trust. See
Taxation of trusts (United Kingdom) The tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law, a legal person is any person A person (plural people or persons) is a being that has certain capacit ...
. The first slice of cumulative transfers of value (known as the "nil rate band") is free of tax. This threshold is currently set at £325,000 (tax year 2012/13) and has recently failed to keep up with house price inflation with the result that some 6 million households currently fall within the scope of inheritance tax. Over this threshold the rate is 40 percent on death or 36 per cent if the estate qualifies for a reduced rate as a result of a charitable donation. Since October 2007, married couples and registered civil partners can effectively increase the threshold on their estate when the second partner dies - to as much as £650,000 in 2012–13. Their executors or personal representatives must transfer the first spouse or civil partner's unused Inheritance Tax threshold or 'nil rate band' to the second spouse or civil partner when they die. Transfers of value between United Kingdom-domiciled spouses are exempt from tax. Recent changes to the tax brought in by the Finance Act 2008 mean that nil-rate bands are transferable between spouses to reduce this burden - something which previously could only be done by setting up complex trusts. Gifts made more than seven years prior to death are not taxed; if they are made between three and seven years before death a tapered inheritance tax rate applies. There are some important exceptions to this treatment: the most important is the "reservation of benefit rule", which says that a gift is ineffective for inheritance tax purposes if the giver benefits from the asset in any way after the gift (for example, by gifting a house but continuing to live in it). Inheritance Tax is not levied on the estate of persons who died "on active service" or from the effects of wounds sustained on such service...regardless of how long after that may be if it can be proven as the cause of death. In addition as the deceased spouse is subject to an exemption that full nil rate band is transferable to the surviving spouse's estate on the survivor's death.


Council Tax

Council tax is the system of local
taxation A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act accord ...
used in
England England is a Countries of the United Kingdom, country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest of England and the Celtic Sea to the southwest. E ...

England
,Communities and Local Government
Council Tax: The Facts
Scotland Scotland ( sco, Scotland, gd, Alba Alba (Scottish Gaelic Scottish Gaelic ( gd, Gàidhlig or Scots Gaelic, sometimes referred to simply as Gaelic) is a Goidelic language (in the Celtic languages, Celtic branch of the Indo-European ...

Scotland
and
Wales Wales ( cy, Cymru ) is a Countries of the United Kingdom, country that is part of the United Kingdom. It is bordered by England to the Wales–England border, east, the Irish Sea to the north and west, and the Bristol Channel to the south. It ...

Wales
to part fund the services provided by local government in each country. It was introduced in 1993 by the
Local Government Finance Act 1992 The Local Government Finance Act 1992 includes obligations of the occupants or (in the case of vacant properties and Houses of Multiple Occupation) the owners of properties in the United Kingdom (except Northern Ireland) to pay Council Tax. It repe ...
, as a successor to the unpopular
Community Charge The Community Charge, commonly known as the poll tax, was a system of taxation introduced by Margaret Thatcher's government in replacement of Rates in the United Kingdom#Domestic rates, domestic rates in Local government in Scotland, Scotland fr ...
("poll tax"), which had (briefly) replaced the Rates system. The basis for the tax is residential property, with discounts for single people. As of 2008, the average annual levy on a property in England was £1,146. In 2006–2007 council tax in England amounted to £22.4 billion and an additional £10.8 billion in sales, fees and charges,


Sales taxes and duties


Value added tax

The third largest source of government revenues is value added tax (VAT), charged at 20 percent on supplies of goods and services. It is therefore a tax on consumer expenditure. Certain goods and services are exempt from VAT, and others are subject to VAT at a lower rate of 5 percent (the reduced rate, such as domestic gas supplies) or 0 percent ("zero-rated", such as most food and children's clothing). Exemptions are intended to relieve the tax burden on essentials while placing the full tax on luxuries, but disputes based on fine distinctions arise, such as the notorious "Jaffa Cake Case" which hinged on whether
Jaffa Cakes Jaffa Cakes are biscuit-sized cakes introduced by McVitie's, McVitie and Price in the UK in 1927 and named after Jaffa oranges. The most common form of Jaffa cakes are circular, in diameter and have three layers: a Genoise, Genoise sponge base ...
were classed as (zero-rated) cakes—as was eventually decided—or (fully taxed) chocolate-covered biscuits. Until 2001, VAT was charged at the full rate on sanitary towels. It was introduced in 1973, in consequence of Britain's entry to the
European Economic Community The European Economic Community (EEC) was a regional organization and Turkey Turkey ( tr, Türkiye ), officially the Republic of Turkey, is a country straddling Southeastern Europe and Western Asia. It shares borders with Greece ...

European Economic Community
, at a standard rate of 10 percent. In July 1974, the standard rate became 8 percent and from October that year petrol was taxed at a new higher rate of 25 percent. In the budget of April 1975 the higher rate was extended to a wide range of "luxury" goods. In the budget of April 1976 the 25 percent higher rate was reduced to 12.5 percent. On 18 June 1979, the higher rate was scrapped and VAT set at a single rate of 15 percent. In 1991 this became 17.5 percent, though when domestic fuel and power was added to the scheme in 1994, it was charged at a new, lower rate of 8 percent. In September 1997 this lower rate was reduced to 5 percent and was extended to cover various energy-saving materials (from 1 July 1998), sanitary protection (from 1 January 2001), children's car seats (from 1 April 2001), conversion and renovation of certain residential properties (from 12 May 2001), contraceptives (from 1 July 2006) and smoking cessation products (from 1 July 2007). On 1 December 2008, VAT was reduced to 15 percent, as a reaction to the
late-2000s recession The Great Recession was a period of marked general decline (recession In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (e ...
, by Chancellor
Alistair Darling Alistair Maclean Darling, Baron Darling of Roulanish, (born 28 November 1953) is a British Labour Party (UK), Labour Party politician who served as Chancellor of the Exchequer in the Labour Government 2007-2010, Labour Government from 2007 to 20 ...

Alistair Darling
. On 1 January 2010 VAT returned to 17.5 percent. On 4 January 2011 VAT was raised to 20 percent by Chancellor
George Osborne George Gideon Oliver Osborne (born Gideon Oliver Osborne; 23 May 1971) is a British politician and newspaper editor who served as Chancellor of the Exchequer The chancellor of the Exchequer, often abbreviated to the chancellor, is a seni ...

George Osborne
, where it remains.


Excise duties

Excise duties file:Lincoln Beer Stamp 1871.JPG, upright=1.2, 1871 U.S. Revenue stamp for 1/6 barrel of beer. Brewers would receive the stamp sheets, cut them into individual stamps, cancel them, and paste them over the bung of the beer barrel so when the barrel ...
are charged on, amongst other things,
motor fuel A motor fuel is a fuel A fuel is any material that can be made to react with other substances so that it releases energy as thermal energy Thermal radiation in visible light can be seen on this hot metalwork. Thermal energy refers to severa ...
,
alcohol In chemistry, alcohol is an organic compound that carries at least one hydroxyl functional group (−OH) bound to a Saturated and unsaturated compounds, saturated carbon atom. The term alcohol originally referred to the primary alcohol ethan ...

alcohol
,
tobacco Tobacco is the common name of several plants in the genus Genus /ˈdʒiː.nəs/ (plural genera /ˈdʒen.ər.ə/) is a taxonomic rank In biological classification In biology, taxonomy () is the scientific study of naming, defini ...

tobacco
,
betting Gambling (also known as betting) is the wagering something of Value (economics), value ("the stakes") on an Event (probability theory), event with an uncertain outcome with the intent of winning something else of value. Gambling thus requires ...
and
vehicles A vehicle (from la, vehiculum) is a machine A machine is any physical system with ordered structural and functional properties. It may represent human-made or naturally occurring device molecular machine that uses Power (physics), power ...
.


Stamp duty

Stamp duty Stamp duty is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelated ...
is charged on the transfer of
shares In financial markets A financial market is a market Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finland and Sweden Art, entertain ...
and certain
securities A security is a tradable financial asset A financial asset is a non-physical asset In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication o ...
at a rate of 0.5 percent. Modernised versions of stamp duty,
stamp duty land tax Stamp duty in the United Kingdom is a form of tax charged on legal instruments (written documents), and historically required a Impressed duty stamp, physical stamp to be attached to or impressed upon the document in question. The more modern vers ...
and stamp duty reserve tax, are charged respectively on the transfer of
real property In English English usually refers to: * English language English is a West Germanic languages, West Germanic language first spoken in History of Anglo-Saxon England, early medieval England, which has eventually become the World la ...
and shares and securities, at rates of up to 4 percent and 0.5 percent respectively.


Motoring taxation

Motoring taxes include: fuel duty (which itself also attracts VAT), and
Vehicle Excise Duty Vehicle Excise Duty (VED) (also known as "vehicle tax", "car tax", or often erroneously as "road tax Road tax, known by various names around the world, is a tax A tax is a compulsory financial charge or some other type of levy imposed on a tax ...
. Other fees and charges include the
London congestion charge The London congestion charge is a fee charged on most cars and motor vehicles being driven within the Congestion Charge Zone (CCZ) in Central London Central London is the innermost part of London London is the Capital city, capital ...
, various statutory fees including that for the compulsory vehicle test and that for
vehicle registration Motor vehicle registration is the registration of a motor vehicle with a government authority, either compulsory or otherwise. The purpose of motor vehicle registration is to establish a link between a vehicle and an owner or user of the vehicle. Th ...
, and in some areas on-street parking (as well as associated charges for violations).


Business taxes


Corporate Tax

Corporation tax is a
tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act accord ...
levied in the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' use Britain as a synonym for the United Kingdom. Some prefer to use Britain as shorth ...

United Kingdom
on the profits made by
companies A company, abbreviated as co., is a legal entity In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surround ...
and on the profits of
permanent establishment A permanent establishment (PE) is a fixed place of business that generally gives rise to income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms.Smith' ...
s of non-UK resident companies and associations that trade in the EU. Corporation tax forms the fourth-largest source of government revenue (after income, NIC, and VAT). Prior to the tax's enactment on 1 April 1965, companies and individuals paid the same
income tax An income tax is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelate ...
, with an additional profits tax levied on companies. The Finance Act 1965 replaced this structure for companies and associations with a single
corporate tax A corporate tax, also called corporation tax or company tax, is a direct tax Though the actual definitions vary between jurisdictions, in general, a direct tax is a tax imposed upon a person or property as distinct from a tax imposed upon a tra ...
, which borrowed its basic structure and rules from the income tax system. Since 1997, the United Kingdom's Tax Law Rewrite ProjectTax Law Rewrite
Her Majesty's Revenue and Customs , type = Non-ministerial government department Non-ministerial government departments (NMGDs) are a type of Departments of the Government of the United Kingdom, department of the Government of the United Kingdom that deal with matters for whic ...
(HMRC), retrieved 17 April 2007
has been modernising the United Kingdom's tax legislation, starting with income tax, while the legislation imposing corporation tax has itself been amended; the rules governing income tax and corporation tax have thus diverged.


Business rates

Business rates is the commonly used name of non-domestic rates, a rate or
tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act accord ...
charged to occupiers of non-domestic property. Business rates form part of the funding for
local government Local government is a generic term for the lowest tiers of public administration Public administration is the implementation of government policy Public policy is a course of action created and/or enacted, typically by a government ...
, and are collected by them, but rather than receipts being retained directly they are pooled centrally and then redistributed. In 2005–06, £19.9 billion was collected in business rates, representing 4.35 percent of the total United Kingdom tax income.Public Finances Databank
(see section C4), HM Treasury, retrieved 26 March 2007. ''Percentage based on Net taxes & NICs conts.''
Business rates are a
property tax A property tax or millage rate is an ad valorem tax An ''ad valorem'' tax (Latin language, Latin for "according to value") is a tax whose amount is based on the value of a transaction or of property. It is typically imposed at the time of a ...
, where each non-domestic property is assessed with a rateable value, expressed in
pounds Pound or Pounds may refer to: Units * Pound (currency), a unit of currency * Pound sterling, the official currency of the United Kingdom * Pound (mass), a unit of mass * Pound (force), a unit of force * Rail pound, in rail profile Symbols * Po ...
. The rateable value broadly represents the annual rent the property could have been let for on a particular valuation date according to a set of assumptions. The actual bill payable is then calculated using a multiplier set by central government, and applying any reliefs.The rates bill - How is it calculated?
, mybusinessrates.gov.uk


Business and personal taxes

Some taxes are, depending on the circumstances, paid by both individuals and companies, and government


National Insurance contributions

The second largest source of government revenue is
National Insurance National Insurance (NI) is a fundamental component of the welfare state in the United Kingdom Welfare is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social s ...
contributions (NICs). NICs are payable by employees, employers and the self-employed and in the 2010–2011 tax year £96.5 billion was raised, 21.5 percent of the total collected by HMRC. Employees and employers pay contributions according to a complex classification based on employment type and income. Class 1 (employed persons) NIC is charged at several rates depending on various income thresholds and a number of other factors including age, the type of occupational pension scheme contributed to by the employee and/or employer and whether or not the employee is an ocean-going mariner. Certain married women who opted to pay reduced contributions (in return for reduced benefits) prior to 1977 retain this right for historical reasons. Employers also pay contributions on many benefits in kind provided to employees (such as company cars) and on tax liabilities met on behalf of employees via a "PAYE Settlement Agreement". There are separate arrangements for self-employed persons, who are normally liable to Class 2 flat rate NIC and Class 4 earnings-related NIC, and for some voluntary sector workers.


Health and social care levy

On 7 September 2021,
Prime Minister A prime minister or a premier is the head of the cabinet Cabinet or The Cabinet may refer to: Furniture * Cabinetry, a box-shaped piece of furniture with doors and/or drawers * Display cabinet, a piece of furniture with one or more transpa ...
Boris Johnson Alexander Boris de Pfeffel Johnson (; born 19 June 1964) is a British politician and writer serving as Prime Minister of the United Kingdom The prime minister of the United Kingdom is the head of government The head of govern ...

Boris Johnson
announced that a new tax would be introduced from April 2023 in order to fund the
National Health Service The National Health Service (NHS) is the umbrella term for the publicly funded healthcare systems of the United Kingdom (UK). Since 1948, they have been funded out of general taxation. There are three systems which are referred to using the " ...
backlogs arising as a result of the
COVID-19 pandemic The COVID-19 pandemic is an ongoing global pandemic A pandemic (from , , "all" and , , "local people" the 'crowd') is an of an that has spread across a large region, for instance multiple or worldwide, affecting a substantial numbe ...

COVID-19 pandemic
and the reform of
social care in England Social care in England is defined as the provision of social work, personal care, protection service, protection or social support services to children or adults in need or at risk, or adults with needs arising from illness, disability, old age or ...
.https://www.theguardian.com/politics/2021/sep/07/boris-johnson-unveils-12bn-a-year-tax-rise-to-pay-for-nhs-and-social-care The tax will have a similar application to NICs and will be charged to both employees and employers at a rate of 1.25% on an individual's earnings. However, it will also be payable beyond State Pension Age, which is not the case for NICs. From April 2022 to March 2023, the 1.25% increase will temporarily apply to NICs in order to give
HMRC , type = Non-ministerial government department Non-ministerial government departments (NMGDs) are a type of Departments of the Government of the United Kingdom, department of the Government of the United Kingdom that deal with matters for whic ...
time to make the changes required in order for the levy to be introduced.


Capital gains tax

Capital gains Capital gain is an economic concept defined as the profit Profit may refer to: Business and law * Profit (accounting) Profit, in accounting Accounting or Accountancy is the measurement, processing, and communication of financial an ...
are subject to tax at 10 or 20 percent (18 or 28 for capital gains relating to residential property)(for individuals) or at the applicable marginal rate of corporation tax (for companies). The basic principle is the same for individuals and companies - the tax applies only on the disposal of a capital asset, and the amount of the gain is calculated as the difference between the disposal proceeds and the "base cost", being the original purchase price plus allowable related expenditure. However, from 6 April 2008, the rate and reliefs applicable to the chargeable gain differ between individuals and companies. Companies apply "indexation relief" to the base cost, increasing it in accordance with the Retail Prices Index so that (broadly speaking) the gain is calculated on a post-inflation basis (with different rules apply for gains accrued prior to March 1982). The gain is then subject to tax at the applicable marginal rate of corporation tax. Individuals are taxed at a flat rate of 18 percent (or since 22 June 2010, 28 percent for higher rate taxpayers) with no indexation relief. However, if claiming Entrepreneurs' Relief the rate remains 10 percent. Capital losses from prior years can be brought forward. Expenditure on a business (such as a property business) made by an individual can be claimed as an allowance against Capital Gains. Whether expenditure is claimable against income (potentially reducing income tax) or capital (potentially reducing capital gains tax) depends on whether there was improvement of the property: if there was none, it is against income; if there was some, then it is against capital. Transfers between husband and wife or between Civil partnership in the United Kingdom, civil partners do not crystallise a capital gain, but instead transfer the purchase price (book cost). Otherwise, transfers made as gifts are treated for CGT purposes as being made at the market value at the date of transfer.


Tax gap

The 'tax gap' is the difference between the amount of tax that should, in theory, be collected by HMRC, against what is actually collected. The tax gap for the United Kingdom, UK in 2013–14 was £34 billion, or 6.4 percent of total tax liabilities. It can be broken down by tax type and behaviour


See also


UK-related

* HM Revenue & Customs * Chartered Institute of Taxation * Government spending in the United Kingdom * Institute of Indirect Taxation * Income in the United Kingdom * Tax credit * Starting rate of UK income tax * Economic history of the United Kingdom * History of taxation in the United Kingdom ** History of taxation in the United Kingdom#Why the United Kingdom income tax year begins on 6 April, Why the United Kingdom income tax year begins on 6 April * History of inheritance taxes in the United Kingdom


Local taxation

* Business rates * Council tax * Local income tax
UK Income Tax Calculator


General category

* Tax * Tax haven * Tax law


References


Citations


Sources

*
Stephen Dowell Stephen Dowell (1 May 1833 — 28 March 1898) was an English historian and legal writer, best known for his history of taxation in England. Biography Dowell was born on 1 May 1833, in Shorwell on the Isle of Wight The Isle of Wight () is ...
, ''History of Taxation and Taxes in England'' (Routledge, 2013) {{DEFAULTSORT:Taxation in the United Kingdom Taxation in the United Kingdom,