UK Tax


UK Tax Overview

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VAT

VAT, or value added tax, is regulated by the Value Added Tax Act 1994 and there are three rates. The standard rate is 20%, the reduced rate is 5% and zero rate is 0%. Some goods and services are also exempt from VAT.

The registration threshold for businesses is £83,000 of non-VAT exempt income per financial year. It is possible businesses may voluntarily register in order to reclaim VAT on purchases that were made before the VAT registration threshold was passed. The time limit for reclaiming is 4 years for goods and 6 months for services. 

Corporation tax

Limited companies must pay corporation tax of 19% on taxable profits, such as trading profits and investments. A UK company pays corporation tax on all its profits from the UK and abroad. Foreign companies with a UK branch or office must also pay corporation tax on taxable profits from its UK activities. It is likely the corporation tax will be refuced to 17% by April 2020. 

Employment taxes

Employers are required to deduct personal income tax as well as national insurance from employement using a system called PAYE, Pay As You Earn. It is possible businesses will also have to make deductions for student loan repayments or pension contributions. In order to get a log in for PAYE Online businesses are required to register an employer with HM Revenue and Customers. Businesses are required to keep payroll records, even if none of their employees are paid £113 or more a week. 

Income tax

Income tax is simply a “a tax you pay on your income”, and it is regulated by the Tax Act of 2007. You are required to pay tax on a number of things including the money you earn from employment, rental income, most pensions, some state benefits, income from a trust and benefits you get from your job. However, you are not required to pay tax on interest on savings, some state benefits and premium bonds, for example.The rate of income tax a person is required to pay depends on how much of their earned income is above their personal allowance in the tax year. As a standard, most people’s personal allowance is usually £11,500 per tax year. This may be bigger if you claim Marriage Allowance or Blind Person’s Allowance, however, it will be smaller if your income is over £100,000.