England

Flag Tax of England

Corporate tax

Rate

The corporate tax rate of United Kingdom is 24%. Prior to 1 April 2012 it was 26%. The small profit rate is 20% and applies to companies with taxable profits below GBP 300.000. Taxable profits between GBP 300.000 and GBP 1.500.000 are taxed in correspondence to a tax rate that is corresponding to a sliding scale of the average between the main rate and the small profits rate.

Taxation of dividends

Dividend exemption applies in the vast majority of cases. Dividends by non-small UK companies will be exempt from UK corporation tax in most cases, whether dealing with ordinary shares or non-ordinary shares. A small company may also be eligible for exemption in some instances.

Capital gains

Profits or losses on stock positions in UK or foreign companies can be exempt, providing some conditions are met. In general , the conditions that need to be met consist of a holding period of 1-2 years before the sale and a minimum 10 % stock ownership of the company being sold.

Non-UK resident companies are not subject to capital gains taxes. An exception to this rule applies if the asset in question is held through a UK permanent establishment.

Losses

Trading losses are allowed to offset total profits of the year (including both trading profits and capital profits). If the losses are bigger than total profits a carryback to the previous year is allowed (retroactive). Also, trading losses can be carried forward indefinitely, providing they are offset against trading income in the future.

Capital losses are only allowed to be carried forward and can only be offset by capital profits.

Withholding tax

Interest paid to non-UK residents is subject to a 20% withholding tax. The rate can be reduced under the EU interest and royalty directive, provided the request is granted by tax authorities in UK.

There is no withholding tax on dividends paid by UK companies. A 20% withholding tax is generally the case for any REIT-distributions.

Royalties to non-residents are subject to 20% withholding tax. The rate can be reduced under the EU interest and royalty directive, provided the request is granted by tax authorities in UK.

 

Individual  tax

General

Residents and domiciles of the UK are subject to tax on their world-wide income. Exceptions apply if a person is a non-domicile or is not classified as a ordinary resident. Individuals are considered resident if they spend more than 183 days per year in the UK. Individuals are also considered resident if they spend more than 91 days per year during four consecutive years.

Domicile status is either acquired or can be determined by the parents´domicile.

Taxable income

Residents and domiciles of the UK are subject to tax on their world-wide income.

Rates

Progressive rates apply for income taxes. Income above GBP 150.000 is charged at 50% (income) or 42,5% (dividends). Income between GBP 34.371 and GBP 150.000 is charged at 40% (income) or 32,5% (dividends). Income below GBP 34.371 is charged at rates varying between 10-20% depending on type fo income and the total amount of income.

Capital Gains

Capital gains tax is 28%. If taxable income is less than GBP 34.371 (2012/2013) capital gains are set at 18%. But if gains and income adds up to more than GBP 34.371 the exces is taxed at 28%. Domiciles and residents are subject to capital profit taxes on world-wide capital gains. Non-domiciles can apply for remittance on non-UK assets and an annual exemption is available corresponding to GBP 10.600 for 2012/2013. Non-residents or non-ordinarily residents are generally not chargeable to UK capital gains tax.

For certain entreprenurial businesses the capital profit tax is set at only 10%. No tax is payable on profits up to the annual exempt amount. This amount is set at GBP 10.600 for 2012/2013.

Deductions

Individuals may deduct GBP 8.105 per year (as of 2012/2013) from total income before their income becomes subject to tax. Individuals above 65 years can have a higher allowance, and individuals earning more than GBP 100.000 per year have a gradually reduced deduction.

Real Estate

Stamp Duty Land Tax is charged on transfers of UK real property. The tax is 1-5% depending on the underlying value of the property. 5% is charged if the residential property is valued above GBP 1 million. 4% is charged if the residential property is valued above GBP 500.000 but below GBP 1 million. There is also a council tax for occupation of domestic property.

Inheritance Tax

Inheritance tax is payed on assets in excess of GBP 325.000. The inheritance tax is 40%.

Social Security

National Insurance Contributions (NIC) are payed by employers, employees or self-employed. In general the rates payed by employees are roughly 12% up to a certain threshold (GBP 817per week), and 2% over that threshold. For employers NIC is roughly 13,8% on all income. For self-employed the annual rate is roughly 9% up to a threshold (GBP 42.475 per year), and then 2% on all annual income above that threshold.

VAT

VAT applies to all sales of goods, services and imports. The VAT is 20%. Specfic items have a reduced VAT, often these products and services have a VAT of 15%. In some particular cases the VAT has been eliminated completely, but that is a highly unusual practice.

 

Other

Tax year. Tax year from 6 April to 5 April the following year.

Tax treaties. The UK currently has 125 tax treaties worldwide.

Filing requirements. VAT reutrns are due on quarterly basis. There are cases where taxable persons may be allowed to complete VAT returns monthly.

Registration (for VAT purpose). Taxable supplies above GBP 73 000 per year requires registration. Voluntary registration is possible for businesses operating below this threshold. Deregistration is possible if  htreshold is not met.

 

Links

Tax authorities. HM Revenue & Customs

Consulate

Local Tax Resources

Chamber of commerce

(Online realtor/stock exchange)