For a correct management of your finances, especially if you start to take an interest in the field of investments, it is also good to know the tax obligations you face as well as the tax year dates to avoid running late and increasing the amount due to the tax authorities.
The tax return obligation in the UK arises when income is received either from self-employment, or from foreign companies, or from dividends, leases and financial income, or from capital gains exceeding £100.000 per year.
Taxes can be collected in different ways depending on the person’s source of income or employment status. Alternatively, taxes can be collected on the basis of being self-employed or not employed at all.
Different collection methods
PAYE (Pay As You Earn) – The employee receives his own salary with the withholdings already operated by the employer, who will replace the taxpayer by paying income taxes for it. The final balance (credit or debit) is determined each year – such as for pensions – with the presentation of the tax return.
Self-assessment – The electronic submission of one’s tax return is part of the self-assessment method. This is a popular option for the self-employed or for people filing tax returns for business transactions.
Main taxes: direct and indirect
The British Revenue Agency (HMRC) deals with the collection of income taxes for individuals and companies. The value of taxable income must be calculated taking into account the tax year. Among the taxes of the English tax system, we can make a macro distinction between direct taxes and indirect taxes.
That is the taxes that directly affect the wealth, already existing or at the time it is produced. These are the Income Tax; the National Insurance Contribution tax on social security contributions; the tax on income from companies Corporation tax; the Inheritance tax and the Capital gains tax.
Taxes that indirectly affect wealth when it is spent or transferred. And they are: the value added tax VAT; the Stamp duty; Stamp duty land tax and Customs duty.
The employer must make a deduction from the worker’s paycheck. These deductions are the Income Tax, taxes paid to the government for health, transport, education etc. Income tax increases at progressive rates, for income brackets, it is not applied to a first bracket considered tax-free, after this threshold it goes from a minimum of 20% up to a maximum of 45%.
Each income category has specific rules for determining the total income. The starting point for the calculation of the total income is the gross remuneration received to which the personal deductions granted by law will be applied.
UK Value Added Tax, or VAT, is an indirect tax that businesses and individuals in the UK have to pay on most of the services and goods they provide or they buy. This tax only applies to the added value of a product during each production stage.
It is applied at every stage of production, from production to consumption of the product itself. When a company or individual pays for goods and services, the tax is applied. The UK has introduced a standard VAT rate of 20% and a reduced VAT rate of 5% and 0%. Furthermore, a number of goods and services are totally exempt.
Indeed, from 2021, the UK has the right to decide which products benefit from reduced VAT rates. This list is limited by the EU VAT directive in EU countries. After Brexit, the UK is able to define the scope of reduced VAT rates. For example, health care products for women have been zero-tax since 01.01.2021.
“Coffee trailblazer. Social media ninja. Unapologetic web guru. Friendly music fan. Alcohol fanatic.”
4 Telltale Signs of a Fake Online Casino
How to Track A Cell Phone Number On Google Map
Insomnia: Top Effective Ways To Normalize Your Sleep