Different Types of Taxes in U.K.

October 13, 2010UK Taxby EconomyWatch


Different Types of Taxes in U.K are imposed on public or any other legal entity, which is the source of income of the U K's central Government. These are described below.

Income Taxes:
Most of the incomes of the Government come from income tax. Each individual gets an income tax allowance, and earnings up to this amount is out of the scope of imposing tax. In the year of 2007-08 the amount of that tax allowance is 5,225 pounds for the people lying under the age of 65. However, the income tax pattern has changed in UK throughout the years.

Capital Gains Tax: Capital gains tax is a type of income tax. Capital gain is a kind of gain which is achieved by selling and as well as exchanging the capital assets, e.g stocks, bonds etc. This profit can also be earned by the trading of real assets, for example, property.

Generally, capital gains tax is imposed on the selling price of an asset. However, some costs are also admissible for calculating the chargeable profits. These are indexation allowance, costs of capturing and disposing the asset, expenditure on increasing the asset's value and the acquisition cost or market value on 31 March 1982.

For an individual, first 8,800 pounds of the net profit is not under the scope of tax. The tax will be implied after that marginal point and it is directly proportional to the uprising profit, for example, 10% tax will be taken for the next 2,150 pounds, 20% for the next 3,150 pounds and so on.

Capital gains tax for the companies are computed on the basis of profit, i.e subtracting the total cost from income. Companies are given an indexation allowance which is a multiplicative value of the Retail Price Index and cost of the assets. They are not facilitated with any yearly exemption.
Corporation Tax:
People resided and as well as domiciled in the United Kingdom have to pay the corporation tax on their profit. For the companies, if they are situated in UK or their management is controlled from UK then, they will be treated as a resident of the UK. Therefore they will also be taken under the scope of the corporation tax.

However, certain tax reductions are also there for the small and middle level companies and a tax rebate is allowed on the cost of intangible assets, i.e company's intellectual property, goodwill etc, after 31 March 2002.

Corporation Tax Rate: The rate of Corporation tax, which is equal to 30%, is imposed on the net gain if it goes beyond a certain limit and that is 1,500,000 pounds. But for low level companies, the rate is 19% and that limit is 300,00 pounds.
Value Added Tax:
Value Added Tax is applied on the trade of taxable services and products made in the country. It is the third highest source of income of the UK Central Government. It is applicable on imported and exported products that comes from or goes outside the European Union as well.

Traffickers with a net profit of less than 660,000 pounds will be taken under the focus of this tax on the basis of not invoice but cash. The standard rate of Value Added Tax is 17.5%. Moreover, some goods and services are kept out of the scope of Value Added Tax, and others, like domestic power and fuel , several energy saving equipments etc, are rated at 5%.
Excise duties:
Excise duties are acted upon several things like alcoholic products, mineral oils, tobacco, motor vehicles etc.
Motor Tax:
It comprises the vehicle excise duty and fuel duty. Many other taxes like various statutory fees, London's congestion charge etc, are also included in motor tax.
Stamp Duty:
Stamp duty is imposed on some products and transfer of shares. The rate of stamp duty on shares is 0.5%. Stamp duty is not imposed on transactions, but stamp duty land tax calculation is based on the land transactions.
Inheritance Tax:
If a person, domiciled in the country, expires then the scope of inheritance tax will be opened. This tax will be acted upon death and some longtime transfer at a rate of 40% and 20% respectively. However, there will be no tax for the first 2,85,000 pounds.