What Is BRITISH TAX SYSTEM and How Does It Work?
The British tax system is extremely complicated, and it can be difficult for the average citizen to understand how much and when to pay. It is, in fact, a complex web of tax brackets, allowances, and relief schemes. The general rule is that the amount of tax you must pay will always be determined by how you earn your salary.
The UK system, for example, has established a plethora of different tax rules that will vary depending on your job situation: you will pay your tax income depending on whether you are an independent worker, a sole trader, an employee, an employer, a business owner or director.
Furthermore, everyone, including students, is entitled to a variable amount known as Personal Allowance, which represents the amount of money you can earn each fiscal year before having to pay income tax. This value may vary depending on your personal circumstances. The amount of personal allowance you will receive is determined by the government and may vary from fiscal year to fiscal year. Another thing you should know about the British tax system is that there are some fixed dates for you to pay your taxes.
In the United Kingdom, tax year dates are based on the fiscal year, which runs from 6 April to 5 April. Continue reading if you have recently moved to the United Kingdom and are unsure about the income tax you must pay. We’ll go into more detail in the following paragraphs to help you figure out how much you have to pay and what kind of personal allowance you’re entitled to.
Do I Need To Pay Income Tax?
Most types of income, such as wages and salaries from work, are subject to income tax in the United Kingdom, as previously stated. Profits (for example, if you own a business), pensions, rents (if you own a home), and interest and dividends from various investments and savings are all subject to this tax. HMRC is in charge of collecting income tax on behalf of the government in order to fund public services. In some cases, however, you may not have to pay income tax on all taxable earnings if you are eligible for an allowance.
Even students in the United Kingdom are entitled to a personal allowance. If you request marriage allowance or, for example, blindness allowance, you may be eligible for a higher personal allowance than usual. The government determines the amount of personal benefit you are entitled to, which may change depending on the tax year and your employment situation. Currently, the standard personal allowance is £12,500. For those earning more than £100,000, the £12,500 amount is reduced by £1 for every £2 earned.