Moving to the UK – Taxation

The UK is a popular choice for people looking to start a new life abroad. What do you need to know about finance and tax in the UK before you make the move?

The UK has long been a popular choice for those looking to emigrate to start a new life. With much to offer it is no surprise that it’s a firm favourite with people all over the world.

One of its standout benefits has to be its social security system and the famous NHS – National Health Service.

In addition to this, it has fantastic job and career opportunities, excellent education and offers a great lifestyle.

OK so there may be a little more rain than you would expect but you can’t have everything.

So what do you need to know before you start your new life? Let’s have a look at the various aspects of finance and tax in the UK.

Tax obligations when moving to a new country

Tax and National Insurance (Social Security as it is otherwise known) is governed by HMRC – Her Majesty’s Revenue and Customs.

There are very strict guidelines that apply to those that live and work there. In addition to this, there are other elements of finance and tax in the UK that you need to consider.

Of course, as with any country, there are many different forms of tax, some of which will apply and some of which won’t.

In the first instance, it’s important to ensure that your finances are in order in your home country. This will involve informing them you are moving abroad and the time that you are expecting to be out of the country for. You will need to ensure that you file a tax return and settle any money owed.

If you have been paying tax through your salary, you may find that you are entitled to a tax refund. This will probably be worked out once the financial year is finalised.

Once you arrive in the UK, you will need to inform the HMRC of your arrival and fill in any necessary forms.

Make sure that all aspects of finance and tax in the UK that apply to you are covered. They do have a very good online system which means most things can be found out and filled in online.

Income tax rates in the UK

Income tax in the UK comes under the remit of the HMRC and the tax year runs from April to March.

For those in employment, the employer informs the HMRC and tax are deducted at source from your salary. If you are self-employed, then you will be expected to register online or over the phone for self-assessment.

At the end of the tax year, you will have until October of the following year to file a paper tax return and Jan 31st to file an online tax return.

All monies owed must be paid by January 31st, or you could face a hefty fine.

Tax in the UK is not charged on earnings of up to £11,500. After £11.500 it is charged at 20% until you reach £45,000. It is then charged at a higher rate of 40% for £45,001 to £150,000 and 45% for those who earn more than £150,000.

Social security contributions in the UK

Social security in the UK is known as National Insurance and those who are employed or self-employed are expected to make National Insurance contributions.

Once a person turns 16 they are awarded a National Insurance number which is with them for life. Everyone must have an NI number in order to make contributions.

This entitles everyone to a state pension once they reach retirement age. Other benefits include Maternity Allowance, Bereavement

Other benefits include Maternity Allowance, Bereavement Benefits and Jobseeker’s Allowance. The National Health Service is not funded by National Insurance but by

The National Health Service is not funded by National Insurance but by the tax. Everyone pays National Insurance when they earn £157 a week or more.

For those that are self-employed, you must make contributions on profits of £6,025 or more a year.

Corporation tax in the UK

Corporation tax in the UK is currently at a main flat rate of 19% (excludes ring-fence companies). It has recently been reduced to 19% for the years commencing 2017, 2018 and 2019.

In the year 2020, it will reduce further to 17%.

Corporation tax applies to all limited companies, any foreign company that has a base in the UK, either an office or a branch. It is also applicable to community, sports, and club groups and organisations.

When you start a business, you need to register for corporation tax first and foremost. Then you need to keep records and file a tax return by the deadline once the financial year is complete.

If your company is not solely based in the UK, you will only pay corporation tax on profits made by the UK branch.

VAT in the UK

VAT in the UK for a long time was charged at 17.5%. However, this increased in 2011 to 20% and had remained at this rate ever since.

There are reduced rates and exemptions to VAT on certain goods and services. Children’s car seats are subject to a 5% VAT charge while children’s clothes and most food items are exempt.

Unlike many countries, the VAT registration threshold is much higher, and only companies with a turnover of £85,000 must register. Once a company is VAT registered they can then charge VAT.

If a company is not registered then although they pay VAT on goods and services they cannot charge their clients VAT.

Those companies that are registered can claim the VAT that they pay and must submit a VAT return annually.

Other UK taxes

While income tax, VAT, corporation tax and National Insurance are dealt with at a national level by the HMRC, there is one tax that is dealt with on a council level.

There is something known as the Council Tax in the UK that is set by local councils and payable for those who live in a property. The charge is made per household and is set according to the size and postcode of a property. It is payable annually, and if you are a single adult, you can apply for a 25% discount. This tax applies to everyone living in rented or owned accommodation.

To find out more information about finance and tax in the UK and how it applies to you, the HMRC website is an excellent source of information.