UK income tax is complex, mercifully the HM Revenue & Customs has an informative website which should be your first port of call: http://www.hmrc.gov.uk.
Everyone working in the UK is subject to income tax. Expats are no exception! If you are an employee, taxes will automatically be withheld from your employment income: “Pay As You Earn, or PAYE”. Certain categories have to fill in a year-end tax return, people in these specific categories will be asked directly and personally by HMRC (HM Revenue & Customs) to fill in a tax return. The most common reasons for needing to fill in a tax return are listed on this page: http://www.hmrc.gov.uk/sa/need-tax-return.htm#1. One of the principal reason would be if you are self-employed. If you are required to, or are unsure if you should, file a tax return but have not received it by the end of April, you ought to contact HMRC.
|Taxable Income||Rate of Tax|
|0 – £2,790||10% (Starting rate for savings only)|
|0 – £32,010||20% (Basic rate)|
|£32,011 – £150,000||40% (Higher rate)|
|Over £150,000||45% (Additional rate)|
Tax is payable at the basic rate of 20% on taxable income up to £32,010.
If you have more than £32,010 but less than £150,000 of taxable income, you will have to pay a higher rate of 40% tax on the amount above £32,011 and below £150,000.
If you have more than £150,000 you will have to pay an additional rate of 45% tax on the amount above this level.
To calculate the tax payable you can use this government page http://www.adviceguide.org.uk/index/your_money/tax/income_tax.htm which also details various tax relief.
Sometimes if your circumstances change, you might end up paying too much tax. If you think that this is your case, you will need to take some simple steps to obtain a refund. The process is explain here: http://www.hmrc.gov.uk/incometax/overpaid-thro-job.htm
The Tax Year in the UK runs from April 6 to April 5 the following year. Upon arriving in the UK, you will be required to complete and submit a questionnaire for the Inland Revenue (form P86). This form will be used to determine how you will be taxed. It is important to seek advice before you fill it in. Don’t hesitate to approach your HR manager with tax questions.
Taxes are also taken to cover National Health. Inland Revenue assesses each person’s tax liability individually. If you are self-employed, see HM Revenue and Customs (http://www.hmrc.gov.uk/selfemployed) for information on everything you need to know about registering to pay income tax.
Allowances which can lower the amount of tax you pay include:
- Married Couple’s Allowance
- Maintenance Payment Relief
- Personal Allowances – This year, the amount of ‘tax-free’ income you can claim is £9,440 for those born after 5 April 1948. Employees aged 65 – 74 can claim £10,660.
You can get tax relief by giving to charity, which is known as Gift Aid. For information visit: http://www.hmrc.gov.uk/individuals/giving/basics.htm
There are over 100 countries which have treaties with the UK, in order to avoid double taxation for expats living abroad. For an in-depth guide to countries involved, visit: http://www.hmrc.gov.uk/taxtreaties/index.htm.
Tax information on leaving the UK
On leaving the UK, you should submit a “Leaving the UK” form P85 : http://www.hmrc.gov.uk/cnr/p85_p85s.htm. This form will help the tax office decide how you should be treated for UK tax purposes after you leave. The completed form should be returned to your dedicated tax office. To find out which is your tax office, use the HMRC tax locator: http://www.hmrc.gov.uk/enq.