HM Revenue & Customs is responsible for managing taxes in the United Kingdom. The main types of taxes are Income tax, NICs, VAT, Corporation Tax, Excise & Stamp duties. In most of the taxes, people with high income pay a high rate of taxes.
Once you pay your charges within the UK, it can include making payments to at least three distinctive levels of government: the central government (Human Resource Revenue and Customs), devolved governments, and the nearby government. The tax year is also referred to as the Financial Year and runs from April 6th until April 5th within the succeeding year.
Read this blog thoroughly to know the six main tax types to pay in the UK…..!
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Six Main Types of Tax – United Kingdom
The detail of these six main types of tax is as follows:
1. Income Tax
This is often the tax explicitly imposed on personal pay. The sum of income tax you pay is based on two things:
- How much of your revenue is over your Personal Allowance
- How much of your revenue decreases within each tax band
Your taxable revenue is not the same as your total revenue because taxpayers are permitted to collect a definite amount before they begin to be taxed. This is usually called Personal Allowance, which remains at £12,570. It means that you are only required to pay taxes once your revenue surpasses the limit of this amount. This table shows how much income tax you’re anticipated to pay depending on how much you earn.
You can also claim income tax reliefs on these taxes. To know more about these reliefs, visit GOV.UK.
2. NICs – National Insurance Contributions
In order to gain some benefits and State Annuity, you pay NICs. Anybody over 16, gaining £184 or more each week, or is a sole trader, with a profit of £6,515 or more a year is anticipated to pay NICs. There are several National Insurance classes, which means that everyone has to pay different NICs according to their employment status and revenue.
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3. VAT – Value Added Tax
After income tax and NICs, Vat is the third-largest source of government income. With the average rate being 20% since 4th January 2011, it can be found on most products and amenities. In this group, you will find products such as pushchairs, prams, chocolate, and taxi fares. On the other hand, there’s a decreased rate of 5% exacted on children’s car seats, power, gas, heating oil and strong fuel, and versatility aids for the elderly, among other things. The zero evaluated items incorporate books, meat, poultry, natural products and vegetables, family water, etc. Some other products and amenities are excluded from VAT or are exterior to the framework.
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4. Excise Duties
Excise duties are charged on things such as liquor, tobacco, wagering, vehicles, and the manufacturer of these products being charged. Extract duties are charged additionally to an indirect tax, including VAT and in the UK. It is a separate tax from VAT; one must be filled in. Excise obligation is chargeable, in expansion to any customs duty due, on the products depicted in this part. The excise charge is included within the final deal cost of the item, meaning that the customer pays indirectly.
Excise duties are utilized as an obstacle towards three broad categories of harm:
- Health dangers from misusing harmful substances, e.g., tobacco or alcohol
- Environmental harm e.g., fossil fuels
- Socially damaging/morally shocking action e.g., betting or requesting
5. Corporation Tax
If you are doing business as follows, then you have to pay a corporation tax on company profits.
- A restricted company
- A remote company with a UK department or office
- A club, co-operation, or other unincorporated affiliation such as a sports club
From 1st April 2017, the average corporation tax rate is 19%, but this may decrease to 17% within the next few years. Earlier to this, corporation tax was determined by the measurements of the business’ interest. This charge can be confounding because it must be paid before you record your company tax return, which takes off several businesses with two bookkeeping periods, making it harder to keep an outline.
6. Stamp Duty
If you buy a property or land above the fixed price in Wales, Northern Ireland, and Britain, you must pay SDLT(Stamp Duty Land Tax). Right now, the SDLT edge is £125,000 for private properties and £150,000 for non-residential properties and lands. In case you are buying your first home, than no tax will be imposed on you or even you will be given a discount if and only if:
- The price of the purchase is equal to or less than £500,000
- You or anybody you are purchasing with is a first-time purchaser
Drawbacks of Not Filing the Taxes Correctly
HM Resource & Customs does not have to know about the pay you have already paid tax on, but on the off chance that you have gained other taxable revenue, then you have to state it in a Self Assessment tax return. This revenue may come from offering property, leasing out the property, or any other work you have been performing for yourself, such as offering products online. In case it surpasses the limit of your Personal Allowance amount, you must pay a charge on it.
You will be fined by HM Resource & Customs if you get a Tax Return and you did not return it, and it may result in issuing you with an estimated tax bill. This charge will remain till you send within the completed Tax Return. Late filing will result in a fine even if no payment is owed. In exceptional cases, you will be charged a high fine, which will be the same amount as the tax you owe.
We hope you will understand better the main types of tax with the detail mentioned above. These taxes do not apply to all, and the tax amount is not the same for everyone. It depends on your employment status and revenue.
You can also claim tax relief on these taxes. There are several tax breaks available to help your commerce, and getting benefits from these tax reliefs can help you reserve your resources that can be used for development openings.
We hope you will utilise this blog well..!