List of British Taxes

Written by simon fuller
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List of British Taxes
Depending on how much you earn and where you work, you could have to pay various taxes. (A young woman holding a pen, doing her taxes image by Christopher Meder from Fotolia.com)

A number of taxes affect citizens living in the U.K. Not all of these taxes are applicable to everyone and some only affect those who earn significant amounts or have estates valued at a certain amount. In the U.K., taxes are dealt with by HM Revenue and Customs, who collect taxes and correct situations where too much tax has been taken from an individual.

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Income Tax

This is a tax on income, whether that's income from employment with a company or from self-employment, with the amount of tax owed being calculated by HM Revenue & Customs based upon earnings. If an individual is earning a below a set level of income per year, however, then no income tax will be due on those earnings. In addition, not all income is eligible to be taxed; for example, you can't be taxed on a premium bond win or from tax-exempt accounts.

What can be taxed includes interest on most types of savings, rental income and income from shares in companies.

VAT

VAT stands for value added tax, and comes into effect whenever a business registered for VAT in the U.K. sells goods or services to either another business or a non-business customer. VAT applies to the majority of goods and services, including some from outside the EU (European Union), with businesses adding the cost of the VAT to the prices of goods and services they provide.

U.K. businesses tend to register for VAT, since by doing so, they can reclaim the VAT on goods and services they buy from others. Not all goods and services are included by VAT, however; some services, such as educational courses and some doctor's services, are exempt.

Inheritance Tax

This is a tax that only affects individuals whose estates are valued at certain amounts. It is paid in the event of someone's death, typically by whoever is representing the estate of the deceased following her death, who pays it out of the funds of the deceased. The tax is only payable if the value of the person's estate is valued at over a set amount, determined each year. In addition, inheritance tax may be applicable on gifts made or trusts created during an individual's life, for example, on assets transferred into a trust.

Corporation Tax

This tax applies to the profits of limited companies in the U.K. Each company must register and assess themselves each year in order to work out how much they are liable to pay. Most companies hire an accountant to sort out what they should be paying, since getting it wrong incurs a penalty.

Depending on the type of business involved, there are two types of corporation tax. The first affects small businesses, with a profits threshold set to determine which businesses count as "small." The other affects companies with profits over that threshold.

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