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).
Individual Tax
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
- Some state benefits and grants
- Interest on most savings
- Income from shares (dividends)
- Rental income (unless you're a live-in landlord and get less than the rent a room limit)
- Income paid from a trust
- most pensions, including state pensions, company and personal pensions and retirement annuities
Non-taxable income includes:
- Certain state benefits
- Income from tax-exempt accounts
- Working Tax Credit (WTC)
- Premium bond or Lottery wins
- Dividends from company shares under your dividends allowance
- The first £1,000 of income from self-employment - this is your ‘trading allowance'
- The first £1,000 of income from property you rent (unless you're using the Rent a Room Scheme)
Tax-Free Allowances
Most resident of the UK receive a "personal allowance" of taxable income that is tax-free. For 2021 that amount is £12,570. You may be entitled to a higher Personal Allowance if you are 65 or over. People with disabilities are also eligible for additional allowances.
Tax Rates (2021)
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £150,000 | 40% |
| Additional rate | over £150,000 | 45% |
You can also see the rates and bands after the Personal Allowance. You do not get a Personal Allowance on taxable income over £125,140.
Expats
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, visit Tax Information Exchange Agreements (TIEAs).
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): Most people pay Income Tax through PAYE. This is the system your employer or pension provider uses to take Income Tax and National Insurance contributions before they pay your wages or pension. Your tax code tells your employer how much to deduct.
- Self-Assessment: If your financial affairs are more complex (for example you are self-employed or have a high income) you may pay Income Tax and National Insurance through Self-Assessment. You'll need to fill in a tax return every year.
- Tax deducted "at source": refers to system in which tax is deducted from your income before paying the income due to you.
Therefore, if you are an employee or 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 are self-employed, you will be responsible for filling in a Self-Assessment tax return and paying your own tax.
For complete information visit: Gov.uk/income-tax
Tax Refunds
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 have paid too much tax, you can take some simple steps to apply for a refund.
To claim a refund, contact your Tax Office or apply online for a refund and select the option that fits better your case and the reason why you paid too much tax.
Tax office has all the information they need to check your claim. Otherwise, they will contact you about the documents you need 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 have to attach your P60 and pay slip of April last tax year, and include the reference number of your company and your NI number.
For more information on claiming a refund, visit HM Revenue & Customs Reclaiming Tax page.
VAT
VAT is charged on most goods and services, such as food and entertainment. It is included in the marked price of items
% of VAT | What the rate applies to (2021) | |
Standard rate | 20% | Most goods and services |
Reduced rate> | 5% | Some goods and services, eg: children's car seats and home energy |
Zero rate | 0% | Zero-rated goods and services, eg: most food and children's clothes |
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, subscriptions to membership organizations, selling, leasing and letting of commercial land and buildings.
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.
For further information visit: Gov.uk/vat
Council Tax
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.
You'll usually have to pay Council Tax if you're 18 or over and own or rent a home.
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 £2,061/year in London (2021 data).
To find your Council, use DirectGov's directory. You can search the Council Tax valuation bands here.
Stamp Duty Land Tax (SDLT)
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.
Rates based on the value of property in 2021 are:
- For the purchase of a main residence
- Up to 250,000 – 0%
- From £250,001 to £925,000 – 5%
- From £925,001 to £1.5 million – 10%
- above £1.5 million – 12%
First time buyer
You can claim a discount (relief) if you buy your first home before 8 July 2020 or from 1 July 2021. This means you’ll pay:
- no SDLT up to £300,000
- 5% SDLT on the portion from £300,001 to £500,000
For complete information regarding Stamp Duty, visit: Gov.uk/stamp-duty-land-tax
Update 15/09/2021
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28/04/2017
(see https://www.gov.uk/log-in-register-hmrc-online-services).
The immediate calculation on the website showed a Total overpaid of £XYZ (as expected due to extra pension contribution and work travel expenses).
Exactly 1 week later, I received a message from HMRC stating that I was due a tax refund of £XYZ and that an electronic payment will be made shortly. The day after the funds were on my bank account.
Refund received 8 days after filling form. Very efficient!
18/12/2013
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
15/04/2011
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.
23/07/2008
They also have a tax rebate calculator which you can use to check to make sure you are due a refund before wasting your time:
http://www.tax-rebate.org/tax-rebate-calculator.html
Here in Canada we pay about 33% less in tax. Don't let Gordon Brown and the rest of the government take any extra.
25/10/2007
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
22/05/2007
They have low commission and based in London
25/05/2006
09/02/2003
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 !
20/12/2002
http://listen.to/taxman
This should give you a good idea of what your UK disposable income will be.
06/10/2002
There are various expat tax reliefs and allowances available to help with relocation and travel costs for short-term relocations.
18/05/2002
http://www.inlandrevenue.gov.uk/wftc/howmuch.htm