According to a report by TMF Group, the British tax system is one of the most complex in Europe, and sometimes it may be difficult for a citizen to fully understand how it works, how much, and how often to pay taxes.
As a matter of fact, it is a compounded arrangement of allowances, tax bands, and other relief schemes, which can be difficult to understand for someone who does not know economics. The overall rule is that you will always have to pay taxes according to your salary and your income.
Furthermore, the British tax system has been set with a great variety of tax guidelines that vary according to one's job situation.
How does it work really? Basically, you have to pay income tax depending on whether you're an employee, an employer, a freelancer or self-employed worker, a sole trader, a company owner, and more.
Moreover, everyone, including students, is eligible to get an adjustable amount called Personal Allowance, which essentially consists of the maximum amount of capital you can earn during a fiscal year before paying income tax.
The personal allowance will solely depend on your job situation.
This particular rule has been set by the British Government and could vary from one fiscal year to another.
Once understood how the British tax system works, you should also know that the Government set some fixed dates for citizens to pay their taxes.
As a matter of fact, UK financial year currently runs from April 6 2022 to April 5 2023.
If you have just moved to the UK and you're still figuring out the amount you have to pay, keep on reading: in the following paragraph we'll show you how the British tax system works and how to assess how much and how often to pay your taxes.
Find out if you have to pay income taxIf you're a UK resident, you should know that income tax is charged on the majority of income types, like wages and salaries from work, profits, pensions and retirement plans, rents, and more.
Also, if you are an investor or you own a savings account, the tax will be charged on interest and dividends from all types of investments and savings.
Salary tax is gathered by the HMRC on behalf of the British Government, and uses the funds to provide subsidies for public services.
These include the National Health Service, education system, and welfare system.
Once again, all kinds of investments are included as well, such as investments in public projects, roads, railways and housing construction, and other things like that.
Nonetheless, there are some particular cases in which you won't be required to pay income tax on every taxable earning.
This will depend on whether you are eligible to get an allowance, which is a tax-free part of your income.
Let's go deeper into this matter.
Personal Allowance: what is it?As mentioned above, although it is required for every British citizen to pay income tax according to their economic situation, you might also be eligible to get a personal allowance, which can also be called tax-free allowance.
It is nothing more than a variable amount that is deducted from your monthly earnings before you start paying taxes.
Today, everyone who lives in the United Kingdom is entitled to a personal allowance, including students as well.
In some cases, you might also end up getting a higher allowance than usual.
This could happen if you request a marriage allowance or any kind of disability allowance.
Today, the personal allowance value is currently set at £12,500.
Note: The information in this site is for general guidance only. Users of this site are advised to take professional advice before taking practical tax decisions.
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