The UK has a complex system of corporate taxation, involving a variety of taxes and tax brackets. The main taxes include Corporation Tax, VAT, and Import Duties. There is no national sales tax in the UK, and no export duties are imposed on goods leaving the country. The primary legislations governing these taxes are the Corporation Tax Act 2009, the Value Added Tax Act 1994, and the Taxation (Cross-border Trade) Act 2018. Understanding these taxes and their respective tax brackets is important for businesses operating in the UK to ensure compliance with the law and avoid penalties.
Corporate Income Tax (CIT)
Corporate Income Tax in the United Kingdom is governed by the Corporation Tax Act 2010. Companies and legal entities are subject to corporate income tax on their profits, which include commercial, agricultural, and professional earnings.
Tax rates: The standard CIT rate is 19%. The UK government has announced plans to increase the rate to 25% from April 2023 for businesses with profits exceeding £250,000. For businesses with profits between £50,000 and £250,000, a tapered rate will apply.
Value Added Tax (VAT)
Value Added Tax is regulated under the Value Added Tax Act 1994. The VAT system in the UK is similar to other European Union countries. It is levied on the supply of goods and services, as well as on the importation of goods into the UK.
VAT rates: There are three different VAT rates in the UK:
- Standard rate: 20% (applied to most goods and services)
- Reduced rate: 5% (applied to certain goods and services, such as domestic fuel, children's car seats, and energy-saving materials)
- Zero rate: 0% (applied to a limited number of goods and services, such as food, books, newspapers, and children's clothing)
Excise Duties
Excise duties are taxes levied on specific goods, including alcohol, tobacco, and certain energy products. The rates for excise duties vary depending on the type of goods and are subject to periodic adjustments.
National Insurance Contributions (NICs)
National Insurance Contributions are governed by the Social Security Contributions and Benefits Act 1992. Both employers and employees are required to pay NICs, which fund state benefits such as the National Health Service (NHS), state pensions, and unemployment benefits.
NIC rates: The rates for NICs vary depending on the employee's earnings and the employer's size. For the tax year 2021/2022, the employer's rate ranges from 0% to 13.8%, while the employee's rate ranges from 0% to 12%.
Import Duties
Import duties are governed by the UK Global Tariff, which replaced the European Union's Common Customs Tariff after the UK left the EU. Import duties are levied on goods entering the UK from non-EU countries, with rates varying depending on the type of product and the country of origin.
Import duty ranges: The rates range from 0% to 25% and are generally calculated as a percentage of the CIF (Cost, Insurance, and Freight) value of the imported goods.
Export Duties
The United Kingdom does not generally impose export duties. However, under specific circumstances and for certain products, the UK government may introduce temporary export duties to regulate the domestic market.
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