Understanding tax laws is essential for anyone living or working in the UK, whether you are a resident, a business owner, or a foreign national. The UK tax law is multifaceted, covering various types of taxes that individuals and businesses must be aware of. This blog will delve into major UK taxes.

UK Income Tax Law

Income tax is one of the primary forms of taxation in the UK. It is levied on the income of individuals and varies based on income levels. The system is progressive, meaning that higher earners pay a greater percentage of their earnings in tax. The current income tax rates are divided into different bands:

• Personal Allowance: Individuals are allowed to earn a certain amount, currently £12,570 (as of 2024), tax-free.
• Basic Rate: Any income between £12,571 and £50,270 is taxed at 20%.
• Higher Rate: Income between £50,271 and £125,140 is taxed at 40%.
• Additional Rate: Any income over £125,140 is taxed at 45%.

Taxpayers must file a Self-Assessment tax return if their income exceeds certain thresholds or if they have income from other sources, such as rental or dividend income.

UK Inheritance Tax Law

Inheritance tax (IHT) is imposed on the estate of a deceased individual. It is calculated on the estate’s value at the time of death, and there are specific thresholds and exemptions that apply. The standard inheritance tax rate is 40% on the value of the estate above the threshold of £325,000. Couples can combine their allowances, effectively increasing the threshold to £650,000.

·           UK Tax Law on Gifts

Under UK inheritance tax law, gifts made during a person’s lifetime may be subject to taxation if they exceed certain thresholds. Gifts under £250 per recipient per tax year are exempt from IHT. Additionally, individuals can give away a total of £3,000 worth of gifts each tax year without incurring tax. Any gifts made within seven years of an individual passing away may be added back to their estate for tax purposes, commonly referred to as “potentially exempt transfers.”

UK Tax Laws for Businesses

Businesses in the UK are subject to various tax laws, the most significant of which is corporate tax.

UK corporate tax law dictates how much tax a company must pay on its profits. Following changes to tax rates and structures, the main rate of corporation tax is set at 19% for companies with profits up to

£50,000. For profits over £250,000, the rate increases to 25%. There are also small profits rates and reliefs available for companies to ensure that smaller enterprises are not disproportionately affected by corporate tax obligations.

In addition to corporation tax, businesses may also be liable for VAT (Value Added Tax) depending on their turnover. The current standard VAT rate is 20%, with reduced rates for certain goods and services.

UK Tax Law for Foreigners

Foreigners engaged in work or business activities in the UK must navigate specific tax regulations that differ from those for residents.

·         UK Tax Law Working Abroad

For expatriates working abroad for a UK company, there are provisions under UK tax law that differentiate between residents and non-residents. Typically, non-residents are only taxed on their UK income, allowing them to avoid double taxation. Various reliefs and exemptions may apply depending on the individual’s residency status.

·         UK Tax Laws for Non-Residents

Non-residents are generally only taxed on their UK-source income. They are exempt from certain taxes unless specific conditions apply. It is crucial for foreigners to understand their tax obligations in both the UK and their country of residence to ensure compliance and avoid penalties.

UK Tax Law on Cryptocurrency

The UK government has introduced specific laws concerning cryptocurrency taxation as digital currencies grow in popularity.

The UK crypto tax law treats cryptocurrencies as property for tax purposes. This means that any gains made from selling or trading cryptocurrencies are subject to Capital Gains Tax (CGT). Individuals have an annual exempt amount for CGT, which is currently £3,000 (as of 2024). Any gains above this threshold must be reported and taxed accordingly.

Furthermore, cryptocurrency income earned through mining or trading may be subject to income tax, depending on the circumstances. As the landscape of crypto continues to evolve, staying informed about tax obligations is crucial for anyone involved in cryptocurrency transactions.

UK Tax Law Changes in Autumn Budget 2024

In the Autumn Budget 2024, Chancellor Rachel Reeves introduced significant changes to UK tax laws on 30 October, aiming to rejuvenate the economy while providing relief to low-income workers. Key

measures included a 1.2% increase in National Insurance Contributions (NIC) for employers, rising from 13.8% to 15%, effective from 6 April 2025.

Additionally, the NIC threshold will be lowered to £5,000, applying through April 2028. Capital gains tax rates for share disposals have also seen a notable increase to 18% and 24%. There were no adjustments to personal income tax, although thresholds will be indexed for inflation starting in the 2028-29 tax year, and the inheritance tax threshold remains frozen until 2030.

How Legend Financial Can Help You

Being aware of your obligations and rights under UK tax law helps you manage your finances and ensure compliance better, avoiding unnecessary penalties. If you’re looking for tailored advice and assistance, reach out to Legend Financial.

Legend Financial’s team of experienced tax accountants are equipped to support you on your journey. Don’t leave your financial future to chance; work with experts who can help you make informed decisions, whether a tax accountant or a UK tax lawyer.