It’s safe to say you know what taxes are, because, well, you pay them. But how much in-depth insight do you really have into taxes? The UK tax system is famous of its rather complexity, and if you are misinformed about how it works and its detailed intricacies, you risk paying money you shouldn’t be paying, or worse, not paying money that you should be paying.
Tax systems, while not exactly fun, are a pillar of any modern civilization and a necessity for every society. The notion is simple really; the government takes money from you to provide services that you require, and when it comes to doing that, the UK is one of the best in the world, with a world-class health care system and some of the most professional police in the world, among other things.
What kind of taxes do I need to pay in the UK, and when?
The United Kingdom has several types of taxes, most notably income tax, property tax, capital gain tax, inheritance tax, and value added task. Each of those is quite important and each serves to take care of a specific function. The UK tax year has unique calendar dates; it’s usually set from April 6 to April 5 of the following year.
Generally speaking, you can’t pay taxes in the UK unless you have a national insurance number, which makes you eligible for tax payment. Whether you’re a resident of the country or a foreigner just living in the UK will make a difference in what taxes you’ll pay. The latter only pays taxes on money earned within the UK, while the former pays taxes on money earned worldwide, including foreign investments of all sorts, rental income on properties they own overseas, and foreign pensions, in case you worked for a while overseas.
What if you get in debt?
Because the UK tax system is somewhat strict, people quite often get in debt and face financial hardships and become unable to pay their tax debts. Fortunately, there is a way out of that sorts. An offer in compromise is basically a way where you could pay less than what you actually owe. Basically, an IRS offer in compromise allows debtors to settle their debt for a value less than the actual money they owe the government, and it’s usually done in cases of financial hardships. If you have the entire money amount to settle an offer in compromise, you may not be eligible for this deal, but it’s best you always ask since these things are not set in stone.
Income tax is probably the most important one in the UK, and it’s the one that ties all others together in a way, except the VAT. Income tax is calculated based on a simple formula; what they do is they subtract your personal allowance from your salary and benefits, and what remains is the taxable amount of your money. The current personal allowance rate is £11,850, which is basically the amount of money you don’t need to pay taxes on. Then you have the varying rates which are according to your income: the basic is £11,851 to £46,350 which you pay 20% taxes on, the higher rate is £46,351 to £150,000 and that you pay 40% for, and the additional rate is over £150,000 for which you pay 45%.
Pay your taxes
You might’ve heard of some rich tycoon evading taxes or some other whale with an offshore account for which they pay no taxes. Forget all that and pay your taxes! It’s a fact that the average person would rather not pay any taxes at all, but if you look objectively at the whole taxes ordeal, it’s a very important cornerstone of societal development. Ask yourself, am I getting good services in return for my hard earned tax money? The answer is yes, and for that, paying your taxes should be something you want to do, because you can’t live without a decent public transportation system or an excellent healthcare plan, and that too is a fact.