The taxation system in England has been a point of contention for years and understanding how it works is essential for anyone living or doing business in the country. Understanding the different types of taxation, who pays them, and when they are due can be daunting. In this blog, we will explore the four major taxes that are levied on individuals and businesses in England. We’ll look at each of the taxes in detail and explain what you need to know about them. So, if you’re looking to stay compliant with UK’s taxation laws, read on!
The following Four are the major type of taxes in England or the United Kingdom:
- Income Tax:
The term “income tax” denotes a type of tax that government executes on income produced by businesses and individuals within their jurisdiction.
- Corporation Tax: A corporate tax is a kind of tax on the profits of a corporation. The taxes are paid on a company’s taxable income
- VAT: Value-added tax (VAT) is an ingesting tax on goods and services that is charged at each phase of the supply chain where value is added, from initial making to the point of sale.
- Capital Gains Tax: It is payable when profits are made from selling assets or investments such as property or shares. Regardless of your situation, it’s important to understand each tax and how it applies to you.
Implementations of income tax in the United Kingdom
Income tax is a tax that is levied on the earnings of individuals and companies. The amount of income tax that is payable depends on the level of earnings, with higher earners paying more tax than lower earners.
There are two types of income tax in England and Wales:
Direct taxes are levied on the income of individuals and companies, while
indirect taxes are levied on the purchase of goods and services.
Income tax is a complex area of taxation, and there are many rules and regulations that govern how it is calculated and paid. If you are unsure about anything to do with income tax, it is advisable to seek professional advice from an accountant or tax specialist.
Percentage variations of corporate taxation in England
A corporation tax is a tax on the profits of limited companies and other organizations including clubs, societies, associations, and charities. In England, corporation tax is levied by the central government at 19% on most types of company profits.
There are different rates for the corporation tax see the below table.
However, there are some special circumstances in which a different rate may apply:
|Small profit rate |
profit under £50,000 )
profit over £250,000 )
|Main Rate (all |
profits except ring
|Marginal Relief |
|Marginal Relief |
|Special rate for ‘|
unit trust and
From 1 April 2023, there is no longer a single Corporation Tax rate for non-ring fence profits.
At the Spring Budget 2021, the government announced that the Corporation Tax main rate for non-ring fence profits would increase to 25% for profits above £250,000.
A small profit rate of 19% was also announced for companies with profits of £50,000 or less.
Companies with profits between £50,000 and £250,000 will pay tax at the main rate, reduced by a marginal relief. This provides a gradual increase in the effective Corporation Tax rate.
For-profits from 1 April 2023, use the Marginal Relief calculator to work out how much Marginal Relief you can claim on your Corporation Tax.
- If your company’s annual accounting period doesn’t end on 31 March, you may be eligible for what’s called ‘marginal relief’. This means you could pay a lower effective rate of corporation tax.
- If your company makes profits from ‘ring fence activities’ – such as oil extraction or banking – it will usually pay corporation tax at 30%.
In addition to the main rate of corporation tax, there are also several types of ‘tax relief’ that can reduce the amount of corporation tax your company has to pay. These include:
- Research and development (R&D) tax credits
- Capital allowances
- Patent box relief
The amount of corporation tax you pay will also depend on how much profit your company makes. For example, if your company makes a profit of £300,000 in a year, it will have to pay £60,000 under the bracket of small profits rate,
Value added tax in England
Value-added tax (VAT) is a consumption tax levied on goods and services in the United Kingdom (England). The standard rate of VAT is 20%, with certain items being taxed at a reduced rate of 16.5%, 5% or 0%. VAT is charged on most supplies of goods and services by businesses registered for VAT.
Input tax is the VAT charged on purchases made by a business. This can be offset against any output tax that the business is liable to pay.
Output tax is the VAT charged on sales made by a business.
Certain supplies are exempt from VAT, such as
- insurance, finance, and credit
- education and training
- fundraising events by charities
- subscriptions to membership organizations
P.S: selling, leasing, and letting of commercial land and buildings — this exemption can be waived
Some supplies are subject to a partial exemption, which means that only a proportion of the VAT charged can be reclaimed. Check WhatsApp content
Capital Gain Tax in England
When it comes to taxation in England, there are a few different types of taxes that you may be liable for. One of these is capital gain tax, which is a tax on any profits or gains made from the sale of certain assets.
Capital gain tax is usually only payable on gains made from the sale of shares, property or other assets that have increased in value over time. If you make a profit from selling an asset for more than you paid for it, then you may be liable for capital gain tax.
The amount of capital gain tax you will need to pay will depend on a number of factors, including the type of asset sold and your personal circumstances. In some cases, you may be able to avoid paying any tax on your gains by using certain reliefs or exemptions.
If you are unsure about whether or not you need to pay capital gain tax, it is always best to seek professional advice before making any decisions.
MY Associates will help you to get all this done.
SMY ASSOCIATES the best accountancy firm in England can provide you with a wide range of services to ensure that you are compliant with England’s taxation law. This includes helping you to register for Self-Assessment, complete your tax return, and make any necessary payments. We can also advise you on how to minimize your tax liability and maximize any reliefs or allowances that you may be entitled to.