Tax Liability in the UK: What You Need to Know
The UK has a complex taxation system that can be difficult to understand. Knowing your tax liability is essential for both individuals and businesses. This article will provide an overview of the UK’s tax system and explain the various types of taxes that you may be liable for.
Income Tax: Who Pays and How Much?
Income tax is the most common type of tax in the UK. It is paid on income from employment, self-employment, pensions, savings, and investments. The amount of income tax you pay depends on your level of income and the tax band you fall into. For the 2020/21 tax year, the basic rate of income tax is 20%, while the higher rate is 40%.
National Insurance Contributions: What Are They?
National Insurance Contributions (NICs) are a type of tax paid by employees and employers. They are used to fund certain benefits and services, such as the state pension. Employees pay NICs at 12% on earnings between £183 and £962 per week. Employers also pay NICs at 13.8% on all employee earnings above £962 per week.
Value Added Tax (VAT): What You Need to Know
Value Added Tax (VAT) is a type of consumption tax charged on goods and services in the UK. It is charged at different rates depending on the type of goods or services being purchased. The standard rate of VAT is 20%, while the reduced rate is 5%.
Corporation Tax: What Is It?
Corporation tax is a type of tax paid by companies on their profits. It is charged at 19% for the 2020/21 tax year. Companies must pay corporation tax on their profits, including profits from investments, trading, and property.
Inheritance Tax: Who Pays and How Much?
Inheritance tax is a tax on the estate of a deceased person. It is charged at 40% on the value of the estate above the inheritance tax threshold. The threshold for the 2020/21 tax year is £325,000. It is important to note that some gifts made within seven years of the deceased’s death may also be subject to inheritance tax.