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Taxation
Corporate Income Tax
Companies that are incorporated in the United Kingdom
or Foreign companies where their central management and control
is in the UK, are subject to tax at prevailing rates on their worldwide
income including ordinary income and capital gains, although capital
gains tax is applied after relief for inflation. Non resident companies
are taxed on the income of a branch carrying on a trade in the United
Kingdom and on UK sourced investment income and on chargeable capital
gains on the sale of trading assets situated in the United Kingdom.
United Kingdom companies pay dividends out of their
post tax profits and the payment of dividend is not subject to withholding
tax regardless of where the recipient is resident. The recipient
of a dividend is provided with a tax credit equivalent to the 10%
of the gross amount.
The computation of profits for taxation purposes
often disallows such items as depreciation of capital purchases
and entertaining although capital allowances are available for most
qualifying plant and machinery purchases and range from between
40% and 100%.
Builders do not generally attract capital allowances
although a 3% allowance is extended to Industrial and Agricultural buildings and hotels.
Corporation Tax Rates
Personal Income Tax
United Kingdom citizens who are normally resident
and domiciled in the United Kingdom pay income tax on their worldwide
income at the prevailing rates shown below.
Individuals who are Non UK domiciled are only taxable
(subject to special rules) on UK sourced income or on foreign sourced
income which is remitted to the United Kingdom.
Personal Income Tax - Rates and
Allowances
The rate of relief for the continuing married couple’s
allowance and maintenance relief for people born before 6 April
1935, and for the children’s tax credit, is 10%.
Capital Gains Tax
Capital Gains Tax is charged at 18% from 06.04.2008
on the disposal or sale of capital assets. Taper relief is no longer
available. Entrepreneurs relief is available on qualifying disposals of business from 6th April 2008.
It may be possible for a non-UK domiciled individual
to avoid capital gains tax on the disposal of shares in a UK company
if they are held in an offshore trust.
Inheritance Tax
Inheritance Tax (“IHT”) is charged
at 40% on death and at 20% on certain lifetime transfers. Each individual
has an exemption, currently £312,000 rising to £325,000 for the tax year 2009/10 and £350,000 from April 2010.
Individuals domiciled in the UK are subject to IHT on their
worldwide assets whereas non-UK domiciled individuals are generally
only subject to IHT on their UK assets. There are a wide range of
exemptions and reliefs which may be available to mitigate IHT charges.
National Insurance Tax
National Insurance Tax is a payroll tax used to fund the Welfare
system. It consists of both employers and employees contributions.
The employee suffers a deduction of some 11% of salary, on amounts
between £105 and £770 per week and 1% on salary in excess
of £770 per week. The employer pays 12.8% of salary in excess
of £105.01 per week with no upper limit.
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