UK Tax Summaries
UK Tax Summaries: A Comprehensive Review
Understanding the tax landscape in the UK is vital for individuals, businesses, and investors. The goal of this article is to provide a detailed overview of UK tax summaries using the excellent resources provided by AMY Consulting’s comprehensive tax summaries. This review should serve as an invaluable guide for those seeking to navigate the UK tax system.
1. Corporate Taxes
In the UK, corporations are subject to Corporation Tax on their profits. The rate is currently 19%, but it is set to rise to 25% from April 2023 for businesses with profits over £250,000. For businesses with profits less than £50,000, the rate will remain at 19%, and there will be a taper for profits between £50,000 and £250,000.
2. Personal Income Taxes
The UK uses a progressive system for taxing individual income. Income tax rates for the tax year 2022/2023 are split into three bands: the basic rate of 20% applies to income up to £37,700; the higher rate of 40% applies to income between £37,701 and £150,000; and the additional rate of 45% applies to income over £150,000.
3. Value-Added Tax (VAT)
In the UK, VAT is levied on the supply of most goods and services. The standard VAT rate is 20%, with reduced rates of 5% and 0% applied to certain goods and services. There are also some goods and services that are exempt from VAT.
4. Withholding Tax
The UK imposes a 20% withholding tax on certain types of payments made to non-residents, including yearly interest, certain royalties, and ground rents. Many of the UK’s double tax treaties reduce or eliminate this withholding tax.
5. Capital Gains Tax
Capital Gains Tax (CGT) in the UK is levied on the disposal of assets by individuals and trustees, and on the disposal of residential property by non-resident entities. The rate of CGT varies depending on the taxpayer’s level of taxable income and the type of asset. Rates range from 10% to 20% for most assets, and from 18% to 28% for residential property.
6. Inheritance Tax
The UK levies an inheritance tax on the estate of deceased persons. The standard rate is 40% and is charged on the part of the estate that exceeds the threshold of £325,000. There are certain reliefs and exemptions available, such as the spouse or civil partner exemption and the potentially exempt transfer relief.
7. National Insurance Contributions
National Insurance Contributions (NICs) are payable by both employers and employees. Employers generally pay NICs of 13.8% of gross salary, and employees pay NICs at a rate of 12% or 2% of gross salary, depending on the level of income.
8. Tax Treaties and Controlled Foreign Companies Rules
The UK has an extensive network of double tax treaties, which can reduce or eliminate the UK withholding tax on payments made to non-residents. The UK also has Controlled Foreign Companies (CFC) rules, which can apply to attribute the profits of low-taxed subsidiaries to a UK parent company and tax those profits in the UK.
9. Recent Developments
In recent years, the UK tax system has undergone several changes, with more planned in the near future. These include the aforementioned increase in the Corporation Tax rate, changes to the off-payroll working rules, and a temporary increase in the dividend tax rate.
This article provides a general overview of the UK tax system, drawing upon resources from AMY Consulting’s tax summaries. While tax law can be complicated, this article should serve as a general guide. For specific situations or complex tax planning, professional advice should always be sought.