There are a number of different types of tax that people who are living in the UK must pay. Some of these forms of tax are based on a person’s employment status and how much they are making or have made in the last year, while others may be based on other things, such as the purchases that a person is making.
Every person must pay the correct amount of all of the different taxes that are relevant to them. Whereas the majority of tax most people pay will be calculated for them by the company that they are contracted to, those who work in a contract or freelance capacity do not have this benefit or service. Umbrella companies for contractors are a way for these individuals to basically become an employee of an umbrella company, and then the correct payments and contributions are worked out for them.
In this article, we are going to take a brief look at a few of the different types of tax that people who live in the UK must pay, and what each one of them is related to.
Income Tax
Income Tax is one of the biggest forms of tax in the UK, and makes up the majority of the government’s income. The income tax “pattern” is known for the way that it has changed in the UK over the years, although the basic premise of it is that anyone in employment must pay tax on what they have earned, over a certain amount. Another form of Income Tax is Capital Gains Tax. This is tax that is achieved by selling and exchanging capital assets, for example stocks and bonds, and can also be earned by the trading of real assets like property.
Value Added Tax (VAT)
Another major source of income for the UK government, Value Added Tax, or VAT as it is better known, is “applied on the trade of taxable services and products made in the country”. In simple terms, this basically means that people pay an additional amount in tax on top of whatever purchases they make. However, VAT is usually included in the overall price given or advertised when an item is for sale. VAT is applicable for all imported and exported products that come from or go outside the European Union, as well.
Corporation Tax
Corporation Tax is a tax that is levied on the profits that a company makes. It is applicable for any companies who are situated in the UK or whose management is controlled inside UK shores, as they are then treated as a UK resident. The rate of corporation tax can often vary depending on the size of a company and how much money they are making.
Inheritance Tax
Brought in to replace “Capital Transfer Tax” in 1986, Inheritance Tax is levied on property and money that a person acquires via a gift or via inheritance in the UK.
These are just four of the main forms of tax that may be applicable to different people in the UK.
Summary – This article takes a quick look at some of the main different forms of tax that different people in the UK are applicable to pay. Umbrella companies for contractors can help freelance and contract staff to make sure they are making the right contributions.
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