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UK Tax Laws and Tax System

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UK Income Taxes

Last updated, March 2008

Individual Income Tax: The UK individual income tax rates for 2007/2008 are 10%-40%.

UK Personal annual tax rates 2007/8

Income (GBP)	%
1-2,230	10
2,231-34,600	22
over 34,600	40

Corporate Tax: UK's corporate tax rate for 2007/2008 is 30%.The tax rate would be reduced to 28% from 1.4.2008.
For UK resident companies with annual profits below GBP 300,000 the tax rate is 20%.From 1.4.2008 rising to 21%.

Capital Gains: Capital gains of individuals are added to the highest part of the regular income.
Capital gains for companies are taxed at the standard corporate tax rate.

Residence

An individual in UK is resident when staying in the UK for more than 183 days in a tax year, or when having annual visits to the UK for 91 days in 4 consecutive years.
A company is UK resident if incorporated in the UK, or when the management is in the UK.

UK Tax Deductions

Losses are carried forward indefinitely. Losses can be carried back for one year.
A company holding 75% in a subsidiary can usually file a consolidated tax return.
Depreciation is deducted using the reducing balance method.
The depreciation rate for machinary and equipment is 25%. Industrial buildings are depreciated on a straight line method , 4% per year.
Companies involved in enterprise zones can claim 100% depreciation for commercial buildings.

UK Personal Credits and Deductions

For British residents, the first annual income of GBP 5,435 is tax exempt in 2008/9.
There are also tax credits for taxpayers aged 65-74 , with additional credit for those above 75 years.
There is a standard deduction for each dependant.
Deductions are also permitted for pension plans payments by an employee.
There is a tax relief for gifts given to UK charities.

Deduction of Tax at Source

In the UK tax is deducted at source from the following payments to non residents:
Dividend- 0%.
Interest- 20%.
Royalties- 22%.

Social Security

National Insurance Contributions (NIC) in the UK.
The contributions by the employer and the employee are subject to to ceiling defined by law.

Employer: 12.8% on salary above GBP 5,225 .
Employee: 11% on salary of GBP 5,225- GBP 34,840, with additional 1% for salary above GBP 34,840.
Self employed pay 8% for income under GBP 34,840.

You can find useful info in HM Revenue & Customs site hmrc.gov.uk

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