Inland revenue tax bands
A Board of taxes, Inland Revenue was set up in the UK more than 5 hundred years ago. Originally it was an organization to supervise the collection of special taxes. After going through several changes and handling various departments in its long journey, the Board was merged with HM Customs only in 2005 to form a new department HM Revenue and Customs. It now handles both direct and indirect taxes involving both Central and Local Governments. The Board collects the following Income tax, National Insurance Contributions, Corporation tax, Value Added tax, Exercise Duty etc.
Income Tax The tax imposed on the financial gains of individuals, organizations or other such bodies may fall under the above category. The types of payment that are taxed are referred to as tax-net.
There are three categories of income:
1. Business income
2.Capital gains
3. Salary earnings.
Some rate of income may not be taxable at all while some are taxed when realized such as selling of shares. Personal income tax is deducted at source while other types of income i) interest from banks ii) Property gains are considered as personal earnings. Collections from income tax involve major revenues for the UK Government.
Tax Band The British income system is considered progressive with a number of bands: 20% basic rate for unearned income, 22% basic for earnings from employment, trade, profession etc.For higher rate band, 32.5% on dividends and 40% for other types of income.
There is an allowance for each person for his earnings to be free of tax in each tax year. For 2007- 2008 tax allowance for fewer than 65s is £ 5225. Apart from this there are a number of tax bands with different rate of tax
Income Savings Income Other Income Band Starting
Rate
10% 10% 10% £0-£2,150 Basic Rate 10% 20% 22% £2,151-£33,300 Higher Rate 10% 40% 40% Over £33,300Retrieved from Capital gains
If capital asset is realized over its purchase it can be considered as capital gains. The gains can be made over property, or liquid assets like stocks and bonds.
The gains are taken under tax nets with certain considerations
National Insurance Contributions It is a system of taxes and related social security benefits in the United Kingdom. The employers and employees pay tax, as per the system, on weekly earnings and additional benefits. The self- employed pay tax based on his profits. Such taxes are said to be National Insurance Contributions. The other categories within this system are the beneficiaries upon death, retirement, unemployment, maternity and disability.
Tax BandThe tax band is like this: A zero rate of tax between the lower earning limit of £84 per week and the primary threshold of £94 per week (2006-2007) protecting the contributory benefits of the employees. The tax is levied at 11% but can be reduced 1.6% on Employees contracted out rebate and for persons with a qualifying pension scheme. Employers pay an additional 12.8% tax on earnings over the lower earning threshold i.e. , £94 per week but without the upper threshold. Hence the total earnings are taxed at 12.8% per employee.
Value Added Tax This tax is levied on exchange of goods and services. It is an indirect form of tax and is collected from someone who actually bears the cost of the tax (such as the seller rather than the consumer). Charged at the standard rate of 17.5% on supplies of goods and services. Certain goods are exempt from VAT such as medical and surgical appliances, emergency alarm call system, equipments designed solely for disabled persons. Others subject to VAT are taxed at reduced rate from 5%- 0%.Corporation Tax In UK Corporation Tax is levied on the profits made by companies, voluntary associations, and permanent non-UK resident companies. The main rate is 30% which is levied on taxable income above £ 1.5 million.
Excise Duties Excise duties are charged on motor fuel, alcohol, tobacco, betting and vehicles.
Vehicles Exercise duty bands 2007-2008
£per year VED Co2 (g/km) Alternative Fuel cars Petrol
Cars
DieselCars
A 100 and below £0 £0 £0 B 101-120 £15 £35 £35 C 120-150 £95 £115 £115 D 151-165 £120 £140 £140 E 166-185 £145 £165 £165 F 186-225 £190 £205 £205 G 226 and above £285 £300 £300Generally, UK tax is slapped on income sourced from both in and out of UK. That is, individuals who are both residents and domiciled in the UK are additionally liable to pay taxes on their worldwide income and gains. For individuals residents but not domiciled in the UK, foreign income remitted to the UK are taxed
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