Tax in U.K. – III

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Personal taxes

Income tax

  • Income tax is the single largest source of government revenue in the United Kingdom, making up about 30 percent of the total, followed by National Insurance contributions at around 20 percent.
  • More than 25% of all income tax revenue is paid by the top 1% of taxpayers, i.e. taxpayers with the highest incomes and 90% of all income tax revenue is paid by the top 50% of taxpayers with the highest incomes.
  • The Scottish Parliament has full control over income tax rates and thresholds on all non-savings and non-dividend income liable for tax by taxpayers resident in Scotland.
  • Each person has an income tax personal allowance, and income up to this amount in each tax year is free of tax. For the 2018/19 tax year, the tax-free allowance for under-65s with income less than £100,000 is £11,850
  • For every £2 earned above £100,000, £1 of the personal allowance is lost. This means for incomes between £100,001 and £123,000 the marginal income tax rate is 60%
  • The taxpayer’s income is assessed for tax according to a prescribed order, with income from employment using up the personal allowance and being taxed first, followed by savings income (from interest or otherwise unearned) and then dividends.

Foreign income of United Kingdom residents is taxed as United Kingdom income, but to prevent double taxation the United Kingdom has agreements with many countries to allow offset against United Kingdom tax what is deemed paid abroad. These deemed amounts paid abroad are not necessarily as much as actually paid

Rental income on a property investment business (such as a buy to let property) is taxed as other savings income, after allowing deductions including mortgage interest. The mortgage does not need to be secured against the property receiving the rent, subject to a maximum of the purchase prices of the property investment business properties (or the market value at the time they transferred into the business). Joint owners can decide how they divide income and expenses, as long as one does not make a profit and the other a loss. Losses can be brought forward to subsequent years.

Continued here

Source: Wikipedia.org

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