Taxes are one of the major sources of revenue to the government. In fact, not a single government has its own money. In order to fund security, education, health, and infrastructural projects, the UK government depends on a number of sources, including individual income taxes, social insurance taxes, corporate income taxes, estate, excise, and gift taxes.
Do you think the UK income tax is so high? Not really. However, it is not easy to directly compare taxation between countries due to varying tax credit circumstances. In the UK for instance, income tax is progressive. This implies that the amount of tax you pay increases with increase in the taxable income. In addition, the total income tax an individual is required to remit annually depends on:
• How much personal income exceeds personal allowance
• How much of the personal income falls in various tax bands
The current rates according to each tax band for the fiscal year 2018/2019 for individuals who are entitled to the standard personal allowance of up to £11,850 are as follows:
Those who earn between £11,851 and £46,350 fall in the basic tax rate category. They are required to pay 20 percent of their taxable income.
Individuals earning between £46,351 and £150,000 fall in the higher rate tax category. Their income tax rate is 40 percent of the total taxable income.
Taxpayers who earn over £150,000 are classified in the additional rate band. These fellows remit 45 percent of their taxable income as income tax. It is, however, important to note that you are not eligible for personal allowance if your taxable exceeds £123,700.
Reduced Income Tax
There are a number of circumstances under which UK residents are entitled to lesser income tax. These circumstances allow you to claim income tax relief from HMRC, only if you are eligible. A good example is when you are married or you’ve entered into a civil partnership and your income is below the standard personal allowance. Here, you are eligible to claim Marriage Allowance. If you choose not to claim Marriage Allowance and either of you was born before 6 April 1935, you are eligible for Married Couple’s Allowance.
Personal Tax in the UK Compared To Other Advanced Countries
Do you really want to know whether Britons pay more compared to other developed countries? Of course, you do. In order to make it clear, let’s look at the Guardian Money’s report on income taxes paid by UK residents earning £25,000, £40,000 and £100,000 compared to Australia, other European countries, and the US.
According to their survey, Britons earning £25,000 and £40,000 are subjected to the lowest tax rates comparatively. In addition, the UK residents who earn £100,000 have less of their total income channeled to tax than the rest of European countries.
The Guardian Money report further explains that after personal allowances, national insurance, and income tax are considered, Britons earning £100,000 contribute 34.3 percent of the amount to HMRC. The percentage, according to the survey, is almost the same with that in Australia, Spain, and the US. However, the figure is far much behind that of Germany, Ireland, Sweden, and France at 38%, 41%, 45%, and 59% respectively.
Generally, low-income earners in the UK benefit from a tax-free personal allowance that is higher than that of many countries. Income taxes for higher earners are at par with that of Australia, US, and Spain But much less to that of Ireland, Sweden, and France.
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