English Packages

Taxation in the UK is a complex system designed to fund public services such as healthcare, education, and infrastructure. Here’s an overview of the key components of taxation in the UK:
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1. Income Tax
• What it applies to: Earnings from employment, self-employment, pensions, investments, and rental income.
• Bands (2023/2024):
o Personal Allowance: £12,570 (tax-free income limit).
o Basic Rate: 20% on income between £12,571 and £50,270.
o Higher Rate: 40% on income between £50,271 and £125,140.
o Additional Rate: 45% on income above £125,140.
• The Personal Allowance decreases by £1 for every £2 earned above £100,000.
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2. National Insurance Contributions (NICs)
• What it funds: State pensions, the NHS, and other welfare programs.
• Rates depend on: Employment status (employed, self-employed, etc.) and earnings.
o Class 1 (employees): Paid by both employees and employers.
o Class 2/4 (self-employed): Based on profits.
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3. Value Added Tax (VAT)
• What it applies to: Goods and services.
• Rates:
o Standard Rate: 20%.
o Reduced Rate: 5% (e.g., on energy bills).
o Zero Rate: 0% (e.g., on most food and children’s clothing).
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4. Corporation Tax
• Who pays it: Companies on their profits.
• Rate:
o From April 2023, the main rate is 25% for profits over £250,000.
o A small profits rate of 19% applies to profits under £50,000.
o A marginal relief applies for profits between £50,000 and £250,000.
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5. Capital Gains Tax (CGT)
• What it applies to: Profits from selling assets like property, shares, or businesses.
• Rates:
o Basic Rate taxpayers: 10% (or 18% on property).
o Higher/Additional Rate taxpayers: 20% (or 28% on property).
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6. Inheritance Tax (IHT)
• What it applies to: Estates worth over £325,000 when someone dies.
• Rate: 40% on the value above the threshold.
• Exemptions: Transfers to a spouse or civil partner, or if the estate is below the threshold.
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7. Stamp Duty Land Tax (SDLT)
• What it applies to: Buying property or land in England and Northern Ireland.
• Rates:
o Vary depending on property value and whether it’s residential, commercial, or a second home.
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8. Council Tax
• What it funds: Local government services like waste collection, schools, and policing.
• Rate: Depends on the property’s value and local council area.
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9. Excise Duties
• What they apply to: Specific goods like alcohol, tobacco, and fuel.
• Purpose: To raise revenue and discourage consumption.
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10. Other Taxes
• Dividends Tax: Applies to dividend income exceeding the annual allowance.
• Air Passenger Duty: Charged on flights departing from the UK.
• Insurance Premium Tax (IPT): Applied to insurance premiums.
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Tax rates and allowances are subject to change annually in the Budget set by the Chancellor of the Exchequer. For personal or business tax planning, consulting a financial adviser or tax specialist is recommended.