A Kickstarter’s Guide to Taxation in the United Kingdom – Find Out More Below!
Tax is no one’s favourite subject – but understanding how it works will be truly beneficial. If you are living or planning to move to the United Kingdom, taxation is definitely something worth researching, given how it can potentially impact your personal finances. Learn about the intricacies of taxes in the United Kingdom and how to navigate them below.
How Does Tax Work in the United Kingdom?
Just like most countries around the globe, income tax makes the single biggest revenue for the United Kingdom government. There are multiple types of taxes that apply to individuals and businesses. Aside from that, tax rates, tax brackets, and tax thresholds are different – it depends on where you live in the United Kingdom. Taxes in the United Kingdom are on a marginal tax rate basis, meaning that one will be taxed a certain percentage of income accordingly to the threshold they belong to. The purpose of this taxing method is to tax people based on their earnings, with the lower-incomed individuals taxed lesser than that of higher-income individuals. You can check your income tax with this tool here.
To calculate your tax, add all your taxable income, such as money earned from employment, certain state benefits, certain grants, rental income (does not apply to live in landlord), most pensions like state, company and personal pensions. Then, proceed to calculate your tax-free allowances and minus them with your taxable income. If there are remaining taxes, then by default, you are a taxpayer. However, if there is nothing left, you do not have to pay anything. If you have paid extra taxes in the past, you can apply for a refund. See how to apply for a refund here.
Tax on Expatriates
If you are a non-resident currently living in the United Kingdom, you will only need to pay the income tax. You will not be taxed on your foreign income (if any). To know whether you’re a resident in the United Kingdom or not is fairly simple – it depends on the United Kingdom’s tax year, which starts from 6th April to 5th April the following year. You are considered a United Kingdom resident if you have been working for 183 days or more out of a tax year, and your only residence is in the United Kingdom, where you have either rented, lived or owned the place for 91 days or more. You must have spent 30 days in the residence too.
Stay on Top of Your Taxes
Staying on top of taxes may seem like a logical, no brainer thing to do. But you will be surprised to know how many people get behind their taxes and get subsequent penalties from failing to pay them on time. Start practising how to calculate your taxes and paying them on time – you will be thanking yourself in the long run. If you need help to delegate taxes such as filing taxes, checking income taxes, completing tax returns and understanding the Pay As You Earn (PAYE) system and National Insurance in the United Kingdom, do not hesitate to speak to a professional tax advisor to find out more on the options you have.
