"/> "/> Take a look at how much tax we really pay | MoneyLife

How much tax do we really pay?

Written by Richard Francis // Posted on // Found in EasyLife

Tax is always a talking point in the political calendar and affects all of our finances.

However, keeping track of what we pay out is another thing altogether. With many different types of tax to consider, we thought we’d take a look at the main areas of taxation here in the UK.

Income tax

This is the primary tax expenditure for most individuals and is an automatic deduction from our weekly or monthly pay including earnings, pensions, benefits, savings, investment income and rents.
The UK government has recently raised the minimum threshold to £11,500, meaning anyone earning that amount or less will not pay any Income Tax.

National Insurance

This is another tax taken from personal incomes. National Insurance contributions mean that you can qualify for certain state benefits, which in most cases includes a basic state pension, as well as Employment Support Allowance and bereavement benefits.

Value Added Tax (VAT)

This is paid at a standard rate of 20% on most goods and services. However, you don’t pay VAT on books, children’s clothes, food, postage stamps or financial and property transactions, whilst some domestic heating fuel and power are taxed at a discounted rate of 5%.

Fuel Duty

Fuel Duty is included in the price you pay for petrol, diesel and other fuels used in vehicles or for heating on top of the standard rate VAT at 20% which applies to most fuel types (excluding some domestic fuels). The rate you pay depends on the type of fuel with petrol, diesel, bio-diesel and bio-ethanol charged at the highest rate of 57.95 pence per litre.

Council Tax

This is levied on households by local authorities across the country and is based on the estimated value of a property and the number of people living in it. This money is used to fund public facilities and services including libraries, police and fire services, community support, street cleaning and waste collection.

Stamp Duty

This is the tax you pay on buying a house or land, the cost of which can add up to thousands of pounds depending on the value of your property. The current threshold for paying stamp duty is £125,000 for residential properties and £150,000 for non-residential land and properties. The amount you pay is then determined by percentage thresholds as the value increases.

Excise Duty

Excise Duty refers to the amount we pay on goods including alcohol and tobacco. Different alcohol types have varying rates of excise duty, largely based on levels of alcohol content and units. Tobacco on the other hand is taxed by weight as well as 16.5% of the retail price.

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Inheritance Tax

This is the tax paid on inherited property, money and possessions. There is normally no Inheritance Tax if either the total value is below £325,000 or if everything is left to a spouse, civil partner or charity. Property handed down to children (including adopted, foster or stepchildren) or grandchildren will not be taxed on the first £425,000.

The standard Inheritance Tax rate is 40% and only charged on the value above the relevant threshold.

Capital Gains Tax

Capital Gains Tax is paid on the profits of any possessions or investments that are sold or the increase in value from the date the assets were acquired. This can include:
• most personal possessions worth £6,000 or more excluding cars
• property that isn’t your main home
• your main home if you’ve let it out, used it for business or it’s very large
• shares that aren’t in an ISA or PEP
• business assets
The standard Capital Gains Tax rate for regular taxpayers is 10%, rising to 20% for those who are in the 40% income tax threshold. Sales of second homes incur higher tax rates for both bands.

Insurance Premium Tax

This is paid on most insurance policy premiums not including life insurance. Two main rates of tax apply – 10% for most insurance policies whilst in some cases, including holiday insurances and consumer electrical goods, a rate of 20% applies.

With so many different types of tax to consider, perhaps it is not surprising that it has become such a discussion point, both financially and politically.

Written by Richard Francis // Posted on // Found in EasyLife

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