United Kingdom Personal Income Tax System: Know What To Pay?

The United Kingdom Personal Income Tax System: The United Kingdom administration’s single biggest earning source is their tax system, accounting for up to 30% of its total revenue, followed by “National Insurance Contributions” of the nations, which contributes almost 20%. Further, factually, the top 1% of taxpayers in the UK contribute more than 25% of total tax revenue of the UK government, and top 50% of taxpayers contribute more than 90% of taxes in the UK.

However, the tax system in the UK is also subject to several exemptions, ranging from charity to inherited incomes. Thus, every English citizen must be aware of their national tax policy to mitigate their payments. In contrast, most taxpayers in the UK pay more than required.

In this article, we’ll try to understand the different types of tax rates in the UK, which includes Wales, Northern Ireland, England, and Scotland, in no particular order. The post shall also present which person is exempted from UK taxes and what other exemptions are available.

United Kingdom Personal Income Tax Slabs

The United Kingdom doesn’t segregate its citizens to pay taxes on categories like minor tax, resident tax, non-resident tax, working holidaymakers, etc. The tax rate is the same for all residents. However, there are rules which determine which income is taxable and how much.

Yet, note that the non-residents are only required to pay taxes on their UK income and not on outside the national earnings. In contrast, UK residents are implied to pay taxes on both national and international income. However, to avoid double taxation, one can apply for a tax rebate with the government of the UK.

Here are the details of UK tax rates on different income slabs. The United Kingdom Personal Income Tax rates for the four nations of the UK, i.e. Wales, Scotland, Northern Ireland, and England are described below.

Wales

Tax Rate Type Dividend Income Rate Savings Income Rate Other Income (Incorp. Emp.) Income bracket
Personal Allowance 7.5% 0% 0% £0 – £12,500
Basic Rate 7.5% 20% 20% £12,501 – £50,000
Higher Rate 32.5% 40% 40% £50,000 – £150,000
Additional Rate 38.1% 45% 45% £150,001 +

Scotland

Tax Rate Type Payable Tax Rate Gross Income
Personal Allowances 0% £0 – £12,501
Starter rate 19% £12,501 – £14,549
Basic rate 20% £14,550 – £24,994
Intermediate rate 21% £24,995 – £43,430
Higher rate 41% £43,431 – £150,000
Top rate 46% £150,001 +

England

Tax Rate Type Dividend Income Rate Savings Income Rate Other Income (Incorp. Emp.) Income bracket
Personal Allowance 7.5% 0% 0% £0 – £12,500
Basic Rate 7.5% 20% 20% £12,501 – £50,000
Higher Rate 32.5% 40% 40% £50,000 – £150,000
Additional Rate 38.1% 45% 45% £150,001 +

Northern Ireland

Tax Rate Type Dividend Income Rate Savings Income Rate Other Income (Incorp. Emp.) Income bracket
Personal Allowance 7.5% 0% 0% £0 – £12,500
Basic Rate 7.5% 20% 20% £12,501 – £50,000
Higher Rate 32.5% 40% 40% £50,000 – £150,000
Additional Rate 38.1% 45% 45% £150,001 +

To test if you are a resident or non-resident of the UK here is a quick automatic testing questionnaire.

Non-Residence Test

You are not a British citizen if:

  • You have spent less than 16 days in Britain in the current taxable year.
  • All of you are a full-time overseas worker, with not spending more than 90 days in the UK in the current taxable year.
  • You haven’t worked more than 30 days in the UK in a relevant taxable year.
  • You have not been a citizen of Britain for the last three taxable years and have no plan to spend more than 45 days in the UK.

Residence Test

You are an English nation citizen if:

  • You stay in Britain for more than 182 days a year.
  • Work full time in the UK with living in the nation for at least 274 days in a taxable year.
  • Your native place is the UK, holding a house in the nation, in which you have lived, or rented, or owned it for more than 90 days, including 30 days in the current taxable year.

Exemptions From Taxes

Following are the sectors or investments which are exempted from paying UK taxes:

Certain investments carry a tax favoured status including:

  • UK Government Bonds (Gilts)
  • National Savings and Investments
  • Index-Linked Certificates (up to £15,000 per issue)
  • Premium Bonds (on holdings up to £50,000 per individual).
  • Individual Savings Accounts (ISAs)
  • Pension funds
  • Venture Capital Trusts – 30% tax rebate on income.
  • Enterprise Investment Schemes – 30% relief per individual
  • Seed Enterprise Investment Schemes – 30% relief per individual
  • Insurance bonds
  • Offshore trusts and companies
  • Charitable Incomes

Apart from it, UK citizens who are non-domiciled are eligible to get tax rebates, and lower taxes apply to the events organised or arranged by the British Royal Family.

Allowances provided by the United Kingdom government

A person can also apply for different allowances, apart & above personal allowance, provided by the UK government to protect the citizen interests. Here are the details of major offs provided by the administration on taxes.

  • Blind Person’s Allowance: Money provided to blind or sight-impaired people due to lack of work.
  • Marriage Allowance: Aid given to married couples to cut taxes.
  • Married Couple Allowance: Financial help is given to couples born before April 6, 1935.
  • Trading Allowance: Rebate offered to the self-employment income earners.
  • Property Allowance: Monetary aid offered to rental income earners.

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The Bottom Line

So, this was all about the United Kingdom personal income tax system. Usually, it is difficult to explain the taxation policies to general people, with the UK having the longest tax code in the world since 2009. The code has doubled in size, reaching 11,520 pages in numbers since 1997 and has gone through several changes & reforms.

Note that knowing these tax reforms is not easy, and if one has any doubt over any point, then contacting a professional finance person would be beneficial. Moreover, if anyone wants to start trading, then fxreviews.best offers the right broker reviews to users. You can also contact our team in case of any doubts regarding which broker to choose.

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