UK Tax Laws

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UK Tax Laws & Regulations

Global expansion is a great way to grow your business and the UK offers many appealing opportunities. However, the tax laws can be complex and require time-consuming research. By using our PEO service we will take care of the complicated legwork so that you can focus on your business goals in Britain. Britain is seen as a world leader in innovation and boasts to have one of Europe’s most flexible labor markets. The country also offers many unique tax opportunities for international businesses, such as low corporate tax, favorable double taxation treaties, favorable withholding taxes on interests and royalties, and more. The country also benefits from a well-educated workforce, low-cost business environment, and low costs of living.

We have made it our goal to keep track of the latest changes in the tax policies to always ensure complete compliance. To keep you informed and updated too, we created this guide which includes the basic facts regarding tax regulations in the UK.

Overview of UK Tax

Individual Income Tax – Progressive
VAT – 20%
Corporate Income Tax – 19%
Employer & Employee Social Security Contributions – Depends on employee’s income and category
Capital Gains and Withholding Taxes – 20%
Individual Tax UK – Single, Married

In the UK, an individual’s liability to pay income taxes is determined by their residency status and the source of their income. UK residents are taxed on their worldwide income, whilst non-residents are only taxed on certain types of income that are derived from local sources.

Personal Income Tax in the UK is progressive, based on the amount of income an individual has earned:

  • £0 – £12,570 – 0%
  • £12,571 – £50,270 – 20%
  • £50,271 – £150,000 – 40%
  • £150,000 and over – 45%

The first tax rate is known as the Personal Allowance, where no tax is requested on income that is under or equals to £12,570.

The amount of income tax that is paid in a tax year depends on two factors:

  • How much of the individual’s income is above the Personal Allowance rate.
  • How much of an individual’s income falls within each tax band.

An individual’s income tax is normally withheld from an individual’s salary under the PAYE system. However, not all earnings may be subject to PAYE, but there are a number of special schemes and reliefs that may be used to help limit the PAYE earnings or operate the earnings on an estimated or annual basis. In some cases, the obligation to operate PAYE is also removed.

An individual is also required to pay social security contributions, which are known as national insurance contributions – they must be withheld by employers and paid by the end of the following month. Individuals are taxed on their employment income, with certain tax-free allowances on other sources of income such as dividends, savings interest, and the first £1,000 of income from self-employment or renting property.

The country also operates under a self-assessment tax system – however, one may still need to complete a tax return, which is issued by the HMRC each year. Married couples are independently taxed, and each person must file their own return. Tax returns must be filed and paid by the 31st of January following the end of the tax year. For those filing on paper, the filing deadline is brought forward to the 31st of October after the end of the tax year, which are now only being accepted under certain circumstances (in a move to being fully online).