At The Tax Advisors, we understand that navigating the UK tax system can feel overwhelming. With so many different taxes, rates, and allowances, it’s easy to get lost in the details. That’s why we’re here to break it down for you in plain English. Whether you're an individual or a business, understanding how tax works is essential for staying compliant and optimising your financial health. Let’s dive into the key components of the UK tax system.

Income Tax: What You Need to Know

Income Tax is one of the most well-known taxes in the UK. It applies to your earnings from employment, self-employment, pensions, and even certain benefits. The Personal Allowance, currently set at £12,570 (2024/25), means you won’t pay tax on income below this threshold. Earnings above this are taxed in bands:

• 20% (Basic Rate): £12,571 to £50,270

• 40% (Higher Rate): £50,271 to £125,140

• 45% (Additional Rate): Over £125,140

However, if you earn over £100,000, your Personal Allowance decreases by £1 for every £2 above this amount. At The Tax Advisors, we specialise in helping high earners manage these complex thresholds effectively.

National Insurance Contributions (NICs): Supporting the UK System

National Insurance funds state benefits and the NHS. Both employees and self-employed individuals pay NICs, but the rates differ:

• Employees: Pay 12% on earnings between £242 and £967 per week, and 2% above this.

• Employers: Also contribute based on your earnings.

• Self-Employed: Pay Class 2 and Class 4 contributions based on their profits.

NICs can be confusing, especially if you have multiple income streams. Our experts can ensure you’re paying the right amount while identifying any potential savings.

Value Added Tax (VAT): An Indirect Tax

VAT is added to most goods and services. The standard rate is 20%, with reduced rates of 5% for essentials like domestic energy and zero rates for items such as most food and children’s clothing. Businesses need to register for VAT if their taxable turnover exceeds £85,000 in a 12-month period. Managing VAT can be challenging, but our advisors can help simplify the process for your business.

Capital Gains Tax (CGT): Tax on Profits

If you sell assets like property (not your main home) or investments, you may need to pay CGT. The rates are:

• 10% for basic rate taxpayers

• 20% for higher and additional rate taxpayers

Residential property gains are taxed higher—at 18% and 28%, respectively. At The Tax Advisors, we help clients minimise CGT through careful planning and reliefs.

Inheritance Tax (IHT): Planning for the Future

Inheritance Tax applies to estates valued over £325,000. The standard rate is 40%, but there are ways to reduce this, such as using the residence nil-rate band or making tax-free gifts. Planning your estate effectively is crucial, and we’re here to guide you through it.

Council Tax: Funding Local Services

Council Tax is a local tax paid by homeowners and tenants to fund services like waste collection and libraries. It’s based on property valuation bands set by your local authority. If you believe your property is in the wrong band, we can assist with revaluation requests.

Corporation Tax: For Business Owners

If you run a business, Corporation Tax applies to your profits. As of April 2023:

• 25% for profits over £250,000

• 19% for profits up to £50,000

• A tapered rate for profits between £50,000 and £250,000

Our team specialises in corporate tax planning, helping businesses optimise their tax liability while remaining compliant.

Stamp Duty Land Tax (SDLT): Property Transactions

Buying property? If the purchase price exceeds a certain threshold, you’ll need to pay SDLT. Rates depend on the value and type of property, but first-time buyers may benefit from reliefs. Let us help ensure you’re not overpaying.

Simplifying Tax with The Tax Advisors

Tax doesn’t have to be daunting. At The Tax Advisors, we’re dedicated to making it as straightforward as possible for individuals and businesses across the UK. From income tax planning to VAT advice, we’re here to ensure you stay on top of your obligations while making the most of available reliefs.

Get in touch today for personalised tax advice tailored to your needs. Together, we’ll navigate the UK tax system with confidence.