Taxation in the UK

Corporate Income Tax

Companies that are incorporated in the United Kingdom or Foreign companies where their central management and control is in the UK, are subject to tax at prevailing rates on their worldwide income including ordinary income and capital gains, although capital gains tax is applied after relief for inflation. Non resident companies are taxed on the income of a branch carrying on a trade in the United Kingdom and on UK sourced investment income and on chargeable capital gains on the sale of trading assets situated in the United Kingdom.

United Kingdom companies pay dividends out of their post tax profits and the payment of dividend is not subject to withholding tax regardless of where the recipient is resident. The recipient of a dividend is provided with a tax credit equivalent to the 10% of the gross amount.

The computation of profits for taxation purposes often disallows such items as depreciation of capital purchases and entertaining although capital allowances are available for most qualifying plant and machinery purchases and range from between 40% and 100%.

Builders do not generally attract capital allowances although a 3% allowance is extended to Industrial and Agricultural buildings and hotels.

Corporation Tax Rates


	Taxable Profits		2010-11

	First £300,000		21%

	On Profits over £1,500,000		28%

As from 1st April 2011:

the normal rate reduces to 27%
first £300,000 rate reduces to 20%
Marginal relief is available for profits from £300,000 to £1.5M.

Personal Income Tax

United Kingdom citizens who are normally resident and domiciled in the United Kingdom pay income tax on their worldwide income at the prevailing rates shown below.

Individuals who are Non UK domiciled are only taxable (subject to special rules) on UK sourced income or on foreign sourced income which is remitted to the United Kingdom.

Personal Income Tax – Rates and Allowances


	Income Tax Allowances		2010-11(£)

	Personal Allowance		£6,475

	Personal Allowance for people aged 65-74		£9,490

	Personal Allowance for people aged 75 and over		£9,640

	Income limit for age-related allowances		£22,900

	Married couple’s allowance for people born before 6 April 1935		not applicable

	Married couple’s allowance – aged 75 or more		£6,965
	Minimum amount of married couple’s allowance		£2,670

	Blind person’s allowance		£1,890

The rate of relief for the continuing married couple’s allowance and maintenance relief for people born before 6 April 1935, and for the children’s tax credit, is 10%.


	Taxable Bands		2010-11 (£)

	Basic Rate 20%		£0 – £37,400

	Higher Rate 40%		£37,401– £150,000

	Higher Rate 50%		over £150,000

Capital Gains Tax

Capital Gains Tax is charged at 18% from 06.04.2008 on the disposal or sale of capital assets. Taper relief is no longer available. Entrepreneurs relief is available on qualifying disposals of business from 6th April 2008.

It may be possible for a non-UK domiciled individual to avoid capital gains tax on the disposal of shares in a UK company if they are held in an offshore trust.

Inheritance Tax

Inheritance Tax (“IHT”) is charged at 40% on death and at 20% on certain lifetime transfers. Each individual has an exemption, currently £325,000 for the tax year 2009/10. Individuals domiciled in the UK are subject to IHT on their worldwide assets whereas non-UK domiciled individuals are generally only subject to IHT on their UK assets. There are a wide range of exemptions and reliefs which may be available to mitigate IHT charges.

National Insurance Tax

National Insurance Tax is a payroll tax used to fund the Welfare system. It consists of both employers and employees contributions. The employee suffers a deduction of some 11% of salary, on amounts between £110 and £770 per week and 1% on salary in excess of £770 per week. The employer pays 12.8% of salary in excess of £110 per week with no upper limit.

Who to contact?

If you are interested in more information regarding the registration of a UK company, please contact Steve Friedman, Managing Director of Australia-Offshore:

MANAGING DIRECTOR,
Steve Friedman

Steve is experienced in project structuring and fast growth businesses. Having undertaken executive studies in the area of fast growth businesses at Columbia University in New-York, and through his own enterprises, he has overseen and driven many different strategies for fast growth outcomes.

Entrepreneurship is a key area of interest for Steve. He has been involved in a number of start-up businesses and managed these businesses through to trade sale. His areas of expertise include property, information technology, biotechnology, and infrastructure. Along the way Steve has also been involved in a number of residential and retail property developments.