Taxes

  • Taxation in the UK: essential information and regulations
    • Individuals who are resident in the UK are subject to British taxation. Residence is established once an individual spends 183 days per year in the country. An individual can also be considered a UK resident liable for taxation if they visit the country for 91 days a year over a period of four years. The main tax levied on individuals in income tax.
  • Income tax
    • This tax is levied not only on salaries, but also on everything that falls under the category of income. This includes any money derived from savings (excluding ISAs and some types of investment accounts), benefits, pensions, and employee benefits such as mileage allowances, company cars, company credit cards, and any non-business related expenses covered by an employer.

      Income tax rates are variable and are divided into three categories: basic, higher, and additional. For the tax year 2013-2014, basic income tax rates are fixed at 20 per cent, higher tax rates at 40 per cent, and additional tax rates at 45 per cent. The basic tax rate is applied to income that falls between £0 and £32,010. Higher rates are applicable to those with an income that ranges between £32,011 and £150,000, and the highest tax rate applies to incomes above £150,000.

      During 2013-2014, the tax allowance threshold for individuals under 65 years old has been set at £9,205. Those aged 65 to 74 have a tax-free allowance of £10,500, and for individuals who are over 75 the threshold is set at £10,660. Married couples and those in a civil partnership have an additional tax allowance with an upper limit of £791.50, in cases where at least one of the partners is aged 77 or above. Blind persons have an additional tax-free allowance of £2,160.
  • Business tax
    • Business or corporation tax is levied on the profits generated by all businesses, associations, societies, and charities that operate in the United Kingdom. In addition, companies that are UK-based but reap profits through business activities abroad must pay corporation tax on all profits, irrespective of where these are generated. Sole traders, limited liability partnerships, and local authorities are not subject to corporation tax.

      As of the 1st April 2013, the corporation tax main rate will be set at 23 per cent. There are plans to reduce this rate even further to 22 per cent by the beginning of the 2014 tax year. The main rate is applied to organisations whose profits exceed £1.5 million, whereas a marginal relief is deducted from the main rate for organisations whose profits range between £300,000 and £1.5 million.

      Business tax is paid before filing a Company Tax Return. It is important to note that even inactive or dormant companies must file the relevant tax return for the year. Payment deadlines vary depending on the amount of profits involved. Organisations whose profits exceed £1.5 million must pay corporation tax in quarterly instalments, starting 6 months after the end of the previous accounting period. The rest of organisations must pay the relevant taxes within nine months of the last accounting period. Companies that miss these deadlines will incur interest and penalties on the amount owed.
  • Organisations responsible for taxation
    • The main regulatory body involved in taxation matters in the UK is the H&M Revenue and Customs, which until 2005 was known as the Inland Revenue. The main functions of this government body involve administering tax credit schemes and overseeing the collection of personal and corporate taxes, including income tax, business tax, national insurance, capital gains tax, stamp duty, and others.
  • Becoming a tax consultant in the UK
    • In the United Kingdom, tax advisors or consultants are required to obtain a specialist qualification from the Association of Taxation Technicians (ATT). This consists in sitting 9 papers on topics like professional responsibilities and ethics, law, practice administration, personal, business, and corporate taxation, VAT, and business compliance.

      Generally speaking, a first degree is required in order to qualify for the ATT certification. Given the nature of this training, graduates with a background in finance, accountancy, economics, statistics, business, or law are among the most likely to succeed. Those who hold a Higher National Diploma in business, accountancy, management, or finance are also considered to be good candidates for the ATT certification.

      The direct entry route into this career involves training with the tax department of a company prior to sitting the ATT examinations. Qualified barristers, treasurers, and solicitors can apply for indirect entry, and are eligible to become a chartered tax advisor once they gain 3 years of full-time relevant working experience.

      In addition to having an educational background in a related field, tax consultants are expected to have a solid set of skills that involve high levels of numeracy, an understanding of business and trade, strong analytical skills, and impeccable attention to detail. There are also specific English and Mathematics requirements to be met.