Income Tax And Tax Rates

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Income Tax
As the name implies income tax is a percentage of a person’s income but it is not quite as simple as the percentage changes depending on how much you earn on average in a year (See Figure 1) ergo if you make more money you pay a larger amount of income tax, however most people get a ‘Personal Allowance’ of £10,000 a year which you don’t pay tax on therefore if you don’t earn more than this amount you aren’t required to pay any form of income tax. There are certain forms of income which you don’t pay tax for example certain state benefits, interest on savings, rental income below £4,250 and premium bonds.
Percentage of income taken
Tax rate Taxable income above your Personal Allowance

Basic rate 20% £0 to £31,865
Higher rate
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The UK’s corporate tax is slightly higher with Europe’s average corporation tax which stands at 19.68% this fiscal year but is much lower than the North American average of 33.25% this fiscal year and a Global average at 23.57% this fiscal year.
VAT
VAT is a form of tax which is taken from the majority of goods and services, as well as certain goods imported into the UK outside the EU. VAT can be taken from both B2B and B2C transactions carried out by a business and can reclaim the VAT paid for goods and services required for the business. There are three rates of VAT, Standard (20%), Reduced (5%), Zero (0%) and certain are exempt from VAT or aren’t included in the UK VAT system. To be able to register to be able to use VAT you must first pass the ‘VAT threshold’ which is currently £81,000, meaning your company must have had a turnover at or above £81,000 to be eligible to apply. The rate of VAT changes over time depending on the economic climate for example during 2008 VAT rates dropped to 15% and by 2010 they increased to 17.5% until 2011 when they raised to todays 20% rate. This change in VAT rates can help to determine when a country is in the
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