UK Tax

The blog post outlines some of the issues you will need to consider when paying UK Tax  national insurance, income tax & capital gains tax). Tax taken from your income goes into the UK’s health and social security system which goes to pay for schools, hospitals, the military and other government services.

There are 4 tax brackets in the UK.   Nearly everyone gets a basic entitlement of untaxed income.   After that amount, taxes are banded based on how much you earn per year.

National Insurance

National Insurance is a tax that is taken from your pay. Its goes toward paying for the UK’s  health and social security system, this includes state pensions. The payment is referred to as your National Insurance Contribution. The majority of people working in the UK need to pay National Insurance unless you are from an EEA country which has a special agreement with the UK.

0% for the first £146 per week
12% on the first £146 - £817 per week
2% On any income over £817 per week

The tax is paid every time you get paid (usually once per week or once per month). NI differs from income tax because it doesn’t matter how much you have earned in other pay periods and the tax cannot be reclaimed.

Income Tax

If you are working in the UK and earning over the basic allowance per year you will have to pay income tax.   The tax brackets are described above. This tax is collected by a government body called HMRC (Her Majesty’s Revenue & Customs). Your taxable income is based on the current tax year 6th April – 5th April .

Most people pay income tax through a system called PAYE your can read more about it in our blog post here. Under the PAYE system the government deducts your income tax from your wages before you get paid.

If you are self employed or the director of a company your tax affairs are likely to be more complicated due to dividend payments & paying yourself a wage.

Capital Gains Tax

Capital gains tax is a tax the government levies on the sale of assets that have increased in value. For example if you bought a painting for £5,000 then sold it 3 years later for £25,000 you would have made a profit of £20,000 and you would be liable to pay capital gains tax on the £20,000 profit. Be aware that you only have to pay capital gains tax on profits from items sold if the profit is above a certain amount ( it differs for trusts). You can get more information form the governments websites here.

You pay capital gains tax when you sell items such as:

  1. Personal possessions worth more than a certain amount (including jewellery, paintings, antiques coins & stamps)
  2. Property that isn’t your main home
  3.  Shares that aren’t in an ISA or PEP
  4. Business assets

Reclaiming Tax

You may be entitled to a tax refund if you believe you have overpaid tax, common circumstances are:

  1. You left your job before the end of the tax year and consequently you earned less than you expected.
  2. Your total taxable income for the year is less than the personal allowance.
  3. You did not have a National Insurance number when you started your job or you didn’t tell your employer your number.