If you have recently moved or a planning a move to the UK you should get to grips with the UK tax system. Before you arrive you should have an awareness of what taxes are applicable to you and how you have to pay them.
This three-part series will cover the most frequently asked questions when it comes to tax, with this first part detailing an overview of the UK tax system and what it means for you.
What is a ‘tax year’?
Unlike in some other countries, the UK tax year does not begin on the 1st of January to coincide with a new year. In the UK the income tax year runs from the 6 April to the 5 April the following year. So the current tax year started on the 6 April 2016 and will end on the 5 April 2017.
Who are the HMRC?
HMRC stands for Her Majesty’s Revenue and Customs and it’s the tax authority in the UK. HMRC is responsible for the collection of taxes, the payment of some state support payments and they also administer some other regulations such as the national minimum wage.
What is my ‘tax residency status’ and how does it affect my taxes in the UK?
Your tax residency status decides what taxes you may have to pay in the UK. You are considered a UK resident if:
- You spend at least 183 days or more in the UK during the tax year
- Your only home is in the UK. You must have lived, rented or owned it for at least 91 days and you must spend at least 30 days there per year.
You are considered a non-resident if:
- You spend fewer than 16 days in the UK (or 46 days if you have not been a resident for the past 3 years)
- Your full-time work (of at least 35 hours a week) is not in the UK and you spend less that 90 days a year here, with no more than 30 of those days working.
What will I have to pay?
If you do have to pay taxes in the UK it will most likely be income tax on your earnings. Income tax is paid by everyone who works and earns more than £11000 a year. The rate you pay also depends on your income. The more you earn, the higher the tax rate, and the more you pay. Income tax is taken to pay for services like state education and healthcare. You might have also heard of National Insurance – this helps to pay for things like some state benefits and the state pension. To find out more about what tax band you are in and what your tax rate is, see here.
Keep an eye out for part 2 where we’ll be going over what happens to taxes when you work for yourself.
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