The government collects tax from your earnings to pay for public services provided. These deductions are usually made automatically by your employer. These include the Personal Income Tax and National Insurance (NI).
When living and working in England, you will pay Income Tax. There are different rates of Income Tax depending on how much you earn in one year. Not all income is taxable and you're only taxed on "taxable income" above a certain level. There are reliefs and allowances that can reduce your Income Tax bill.
Taxable income includes:
- Earnings from employment
- Earnings from self-employment
- Most pensions income (State, company and personal pensions)
- Interest on most savings
- Income from shares (dividends)
- Rental income
- Income paid from a trust
Non-taxable income includes:
- Certain benefits
- Income from tax exempt accounts
- Working Tax Credit (WTC)
- Premium bond wins
Most resident of the UK receive a "personal allowance" of taxable income that is tax-free. For 2011-2012 that amount is £7,475. You may be entitled to a higher Personal Allowance if you're 65 or over. People with disabilities are also eligible for additional allowances.
There are a number of deductible allowances and relief's that can reduce your tax bill. The two most popular are:
- Married Couple's Allowance - the husband, wife or civil partner has to be born before 6 April 1935
- Maintenance Payment Relief - either you or your former spouse or civil partner must have been born before 6 April 1935
Unlike tax-free allowances, these actually reduce your tax bill.
Tax Rates (2012-13)
- The basic rate for income £0-34,370: 20%
- The higher rate for income £34,371 to 150,000: 40%
- The higher rate for income over £150,000: 50%
The main personal allowance is £8,105.
(Example: if you earn £50,000 you will pay:
20% * (34,370) + 40% * (50,000 - 34,370 - 8,105)= £9,884 ).
For more on rates, go to the HM Revenue & Customs Rates page.
Expats will need to register with the nearest HM Revenue and Customs office. Many countries have reciprocal agreements with the UK to avoid double taxation. To check if your country has an agreement, go to Tax Information Exchange Agreements(TIEAs).
National Insurance is also deducted from your pay by your employer. NI is a tax to help pay for social security benefits such as free health care, sick pay and maternity pay.
To apply for a National Insurance number, you generally need:
- Evidence of employment (i.e. employment contract or pay slip)
- Letter to confirm your new home address
National Insurance Number (NIN)
A national insurance number is your own personal account number. It is unique to you and you keep the same one all your life. It allows your national insurance contributions and taxes are properly paid and recorded against your name.
- People born in the UK are assigned an NI number and receive a plastic number card shortly before their 16th birthday. This must be kept in a safe place.
- People from abroad who wish to work in the UK, or those to whom a number was not initially allocated as children, may apply for a card by calling # 0845 915 7006, or by contacting DirectGov.
By the time when you don’t have your NI number, Inland Revenue provide you with a temporary number such as TN+date of birth+M for masculine, F for feminine (e.g. TN 03 11 65 M), and charge you with the highest tax level! [See our article on Social Security in this section].
How to Pay
Income Tax is collected in different ways depending on the type of income and whether you're employed, self-employed or not working.
The different ways Income Tax is collected include:
- Pay As You Earn (PAYE): a system of withholding of income tax from payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns. PAYE may also refer to withholding of the employee portion of National Insurance or similar social benefit taxes.
- Self Assessment: necessary for complicated taxes and self-employed.
- Tax deducted "at source": refers to system in which tax is deducted from bank/building society interest at the basic rate before the interest is paid to you
If you're an employee or you receive a company or private pension, your employer or pension provider will deduct tax through PAYE. HM Revenue & Customs (HMRC) may still ask you to complete a Self Assessment tax return if you have complex tax affairs. If you're self-employed, you'll be responsible for filling in a Self Assessment tax return and paying your own tax.
You may end up paying too much into the system if you:
- change jobs often,
- have more than one job at the same time,
- have been without job for part of the year,
- had a period with a temporary number or
- are leaving the UK .
If you think you've paid too much tax you can take some simple steps to apply for a refund.
To claim a refund, contact your Tax Office and explain why you think you've paid too much tax. They may already have everything they need to check your claim. If not, they'll tell you what documents to send. You may get a new tax code, so any refund will be included with your wages, or you will be paid by cheque.
In your letter of complaint, you will attach your P60 and payslip of April last tax year, and include the reference number of your company and your NI number.
For more information on claiming a refund, go to HM Revenue & Customs Reclaiming Tax page.
VAT is charged on most goods and services, such as food and entertainment. It is included in the marked price of items. 2012 VAT is 20 percent.
Certain goods and services are exempt from VAT or may fall outside the scope of the UK VAT system. Items exempt from VAT altogether include: insurance, credit services, education & training and the services of a doctor or dentist. Selling or leasing commercial property is exempt from VAT, though a business can opt to relinquish the exempt status that would allow VAT payable (input tax) to be reclaimed. A reduced rate of 5 percent applies to domestic fuel or power, heating equipment, children's car seats, some contraceptives and sanitary products, certain residential property renovations, and some other items.
Council Tax is a form of local taxation, paid to your local council, for services the council operate such as refuse collection, street lighting, water supply and local amenities.
Rates are set by local councils and vary according to the value of the property (Council tax band based on 1991 values) in which you live. The average Band D (most common) council tax is £1300/year in London.
London City Chambers
City Hall - The Queen's Walk
London SE1 2AA
Tel: 020 7983 4000
To find your Council, use DirectGov's directory. You can search the Council Tax valuation bands here.
Stamp duty is payable whenever you buy a property, except properties in certain designated disadvantaged areas. Rates are based on a percentage of the property value.
Current Rates based on the value of property:
- Up to and including 125,000 - 0 percent
- 125,001 to 250,000 - 1 percent
- 250,001 to 500,000 - 3 percent
- Over 500,000 - 4 per cent
Taxation in the European Union becomes more intense. This also applies for Slovakia. The Slovak Government intends to introduce a new type of tax for business companies (so called licence fee). The licence fee represents some kind of a minimum tax, because there are many companies declaring zero tax or even minus. There will be three basic levels of the licence fee set for Slovak companies and they should apply from January 1, 2014. The main criterion for estimating the amount of licence should be turnover as well as the fact whether a company is a VAT payer or not.
Slovak companies not registered for value added tax (VAT) with turnover of not more than EUR 500,000 should pay a yearly licence fee of EUR 480. Slovak companies registered as VAT payers with turnover not more than EUR 500,000 will pay EUR 960. Companies with a yearly turnover over EUR 500,000 will pay licence fee in amount of EUR 2880. Newly established companies will probably be exempted from this licence fee during the first year of their existence. It will be possible for companies to decrease tax base by the amount of paid licence fee. This licence fee will not apply to Slovak sole-trade businesses (freelancers). posted by www.slovacon.sk
. Bratislava November 11, 2013
From 4th April 2011 NI rates are increasing across the board. The updated rates are:
Employee's NI cost - Employees will now pay 12% NI cost on earnings over £139 and under £817 per week. Over £817 per week this is set at 2%.
Employer's NI cost - This is now calculated as 13.8% of everything over £136 you earn per week. The changes will affect your take home pay from 4th April 2011.
Our worst non-UK domiciliaries tax nightmare is happening.
The 2008/2009 pre-budget report unveils a significant will to levy tax on resident but non uk-domiciled expatriates who have earnings arising abroad, untaxed in the UK under the combined non remittance and non domicile rules.
The pre-budget states that the plans are to amend quite a few rules, and we have highlighted the most relevant:
1)The calculation rule for days of presence in the UK : The day(s) of arrival and departure will now have to be included in the total.
As we understand it, this means that people coming on Monday and leaving on Friday who used to be regarded as spending 3/7 days in the UK will now spend 5/7 days in the UK , and very likely more than 183 in a tax year.
2)7 year rule
Anyone reaching or having previously reached 7 years in the UK will be taxable on their worldwide income, unless they choose to use the remittance basis rule and pay a 30.000 GBP fixed tax charge. In short, you will need to earn a lot to reckon that the 30.000 GBP tax is a light bite. For the rest the 40% bite may be a massive one.
3)The definition and rules for Remittance will be reviewed in order to increase the scope of income liable to tax.
Using the year of remittance versus the year an income arose will not be accepted anymore
The Source ceasing Rule will disappear
4)Non domiciled IT Contractors (or else) using Channel Islands schemes via trusts to legally convert their income into non taxable income may lose that benefit.
This is only a pre-budget, but it sends a strong enough signal of what is to come.
Although it is quite difficult to quantify the impact on expatriate demography, it will clearly make the UK a lot less attractive to many high earners as the UK income tax rate is quite high, and the cost of living in London the highest in Europe .
And as I heard this morning if the money is not there anymore, why not choose quality of life instead!
This article is not a legal statement and should only be read as a view expressed by the writer.
For further information contact www.adexpat.net
Whether you have a national insurance number or not does not affect the level of tax you pay. Your NI number is merely a means of identification, if you don't have one then any NI contributions you pay will not be put to your own personal NI record, and you will have to prove what contributions you made to NICO(National Insurance Contributions Office)by sending in documentation such as a P60. There are instructions on the DWP website on how to apply for a national insurance number. If you are new to the country you must speak directly to the InlandRevenue who will give you the correct forms to complete to avoid beingemergency taxed. Your new employer will be able to give you the phone numberof the correct IR office. I work as a payroll officer in London, so have lots of experience ofdealing with expats from abroad!
When you are seconded to the UK and providing you fill in a P86 showing your intention to remain in the UK on a temporary basis, you can claim tax relief on your housing costs and travelling costs.
Taxation may vary a lot if you are on a French payroll or a UK payroll.
If you are a non ordinary resident you can also claim tax relief for days worked outside the UK.
Worth taking a good look at it !
UK nationals working abroad remain UK residents for tax purposes unless their contract or time abroad covers at least one whole tax year (April 6 to April 5). If your absence is long enough, but your return visits to the UK total 183 days or more in any one tax year or an average 91 days or more spread across four tax years, you remain a UK resident for tax purposes.
There are various expat tax reliefs and allowances available to help with relocation and travel costs for short-term relocations.