Income Tax Allowances
As in most countries, the UK requires you to pay tax on your earnings. In the UK there is a staggered taxation system based on the more you earn the more you pay. The highest rate of tax is 40 per cent on amounts in excess of £32,400 per annum.
The tax year runs from 6 April until 5 April the following year and HM Revenue and Customs (HMRC) is the department responsible for the business of the former Inland Revenue and HM Customs and Excise www.hmrc.gov.uk/.
The first time you start working in the UK your employer will complete and submit a P46 form to HMRC. Until you receive your tax code from the Revenue you will be taxed at the basic rate of tax, which is 22 per cent. Once you are issued with a code, your tax will be adjusted. If your tax code is not adjusted by the end of the year you will have to apply to the Revenue to reclaim any tax you consider you've overpaid. Alternatively, if you haven't paid enough tax you will be liable to pay any additional amount of tax due based on your total earnings for the year.
Taxation for Company Owners
If you are a limited company, the tax liability decreases and you pay corporation tax of 19 per cent on your gross earnings, rather than the standard basic personal rate of tax of 22 per cent.
As long as your earnings (salaries and dividends) don't exceed £32,400 in a tax year, you do not have to pay any additional personal tax.
Running your own limited company in the UK is subject to many regulations, so always consult the relevant professionals to ensure you have the most up-to-date information and are complying with the appropriate laws. The most useful site for limited company information is: www.companieshouse.gov.uk/, or call their helpline on 0870 3333636.
