TAXATION IN UK
Taxation in the United Kingdom involves payments to two different levels of government- local and central government. Local government is financed by grants from the central government funds, business rates, council tax and those from on-street parking. Central government revenues are mainly income tax, national insurance contributions, value added tax, corporation tax and fuel duty.
Income tax form the bulk of revenue collect is ed by the government. Each person has an income tax allowance and income up to this amount in each tax year an income of is free of tax for everyone. Thus in 2006/07 someone with an income of pounds 7,185 per year would only pay pound 215 in tax. The tax year in the UK, which applies to income tax and other personal tax, runs fro m 6 April in one year to 5 April in the next.
Income tax was levied under five schedules:
- Schedule A{tax on income from UK land}
- Schedule B{tax on commercial occupation of land}
- Schedule C{tax on income of public securities}
- Schedule D{ tax on trading income, overseas income and casual income}
- Schedule E{tax on employment income}
- Schedule F{tax on UK dividend income}
UK income tax has changed over the years. Originally it taxed a person’s income regardless of who was beneficially entitled to that income, but now a person only owes a tax on income to which he or she is beneficially entitled. When corporation tax was introduced, most of the companies were taken out of the income tax net, also schedules under which tax is levied has changed. Schedule B was abolished in 1988, Schedule C in 1996, and Schedule E in 2003. Schedule A, D, and F still remain. The Finance Act 2004 introduced an income tax regime known as “pre-owned asset tax” which aims to reduce the use of common methods of inheritance tax avoidance.
The second largest source of government revenue is National Insurance contributions, payable by employees, employers, and self-employed. The third largest source government revenue is value added tax {VAT} charges at the standard rate of 17.5% of supplies and goods. It is a tax on consumer expenditure. The fourth largest source of government revenue is corporation tax, charged on the profits and chargeable gains of companies.
|
