The United Kingdom: Individual Taxation

The direct taxes imposed in the United Kingdom are at national level and consist of income tax, capital gains tax, inheritance tax and national insurance contributions. Generally the amount of income and capital gains tax, which an individual has to pay, depends on whether they are resident and ordinarily resident and whether they are domiciled in the UK. An individual who is domiciled, resident and ordinarily resident in the UK is liable to income and capital gains tax on his or her worldwide income and gains. However, someone resident in the UK but who is not domiciled may (depending on the length of time they have been in the UK) only pay tax on overseas income and capital gains remitted to the UK. Further, it may be possible for a non-domiciled person to structure his other affairs in such a manner that he or she could live off capital, but not interest, accumulated before the decision to reside in the UK If this was done, accepting that the capital was converted into Sterling before the change of residence, it may even be possible for a non-domiciled resident to live in the UK on an effectively tax free basis for the first 7 out of 9 years of their UK residency. Non-UK residents are only liable to UK income tax on income arising in the UK. If an individual is not a UK resident he or she is only liable to capital gains tax on assets disposed of in the UK if he or she is carrying on a trade in the UK through a branch or agency and the asset was used in the branch or agency.

Income Tax Rates (After the 1st. April, 2014)

  • The UK Tax Free allowance is £9,440.00 for those born post 1948
  • The Income Tax Rates are:
  • 20% on income up to £32,010.00
  • 40% on income £32,011.00 to £149,999.99
  • 45% on income above £150,000.00

Capital Gains Tax

Capital gains tax has been substantially overhauled in respect to individuals and personal representatives of trusts and is 28% save where entrepreneurs’ relief is sought where the rate is reduced to 10%.

Inheritance Tax

0% for inherited sums up to £325,000.00 with this sum being exempt - The rate for sums over £325,000.00 is 40% Lifetime gifts are usually exempt if made over 7 years before the donor's death.

For more information on the UK Tax System please contact one of our tax planning consultants.