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Tax solutions

We provide expert advice on tax and investment matters in the UK and worldwide. Taxation systems can be both easy and complex, but either way they require relevant knowledge in order to eliminate losses when making an investment, starting a business or buying a property. We offer advice on tax optimisation, benefits and incentives in various countries — all of this to preserve and increase your wealth and reduce your tax burden.

Nobody would argue that although there are many international jurisdictions that offer preferential and favourable taxation regimes, the United Kingdom is one of the most attractive investment destinations. To use its full potential, you must look at it from different angles and use a thorough approach.

When planning to move to the UK or anywhere else, it is advised to be prepared beforehand in terms of applicable taxes — this will help to foresee and avoid potential losses and problems. Our specialists are happy to analyse your situation and plan your move to a country of your choice and further stay there.

International tax and estate planning

We help affluent individuals who are resident in more than one country or have business abroad, to be internationally tax-aware. Proper and timely assessment of taxation and investment matters will guarantee that you invest your money in the most efficient manner while protecting your wealth. Find out more>

Tax planning for high-net-worth individuals

Imperial & Legal aspired to work with every client long-term to make sure their wealth is preserved and protected over generations. Our efforts are aimed at complying with all regulatory requirements of relevant jurisdictions and optimising tax burden through pro-active planning, tailor-made solutions and efficient risk management. Find out more>

Taxation system in United Kingdom

UK taxation system includes both local and national taxes. National taxes are corporation, income, capital gains, petroleum revenue, inheritance taxes, customs and stamp duties, and excises. There is only one local tax – Council Tax. National taxes make up 90% of contribution to the public purse.

If you want to set up a business in England, remember that all the profits are taxable irrespective of where the company is registered or trades. Companies that are non-UK tax residents are taxed only on the profit received in the UK while profits received outside the UK are not taxable.

Individual UK tax residents and domiciles must pay income tax on all worldwide income. If you are a tax resident in the UK but a domicile in another state, then you are taxed on all income received in the UK and foreign income brought to the UK. How much you need to pay is worked out from company and self-assessment tax reports sent to the HMRC for every accounting period. Tax year in the UK runs from 6 April to 5 April the following year. A company can also change the dates of its accounting period.

UK Corporation tax

Resident companies must pay corporation tax on all their profits irrespective of its origin. For taxation purposes, a resident company is a company incorporated in the UK or with headquarters in the UK. Non-resident companies are companies that have been trading in the UK through a representative office, and they are taxed in the country on any profit related to that representative office.

Corporation tax is calculated for each accounting period. If a company’s accounting period is different from a standard fiscal year, then the profit is separately taxed at the rates applicable for each relevant period.

Corporation tax rates

Corporation tax main rate for the year 2018/2019 starting on 1 April 2018 is 19%. For the year starting on 1 April 2020, it will be reduced to 17%. Lower rate of Corporation tax 10% is applied to profits earned from patented inventions. IP income taxed at 10% is not just income from exploiting patented inventions, it may also come from selling patented products.

Dividends

Dividends received by the UK holding company from other UK companies or from overseas companies should benefit from an exemption from corporation tax, called the dividend exemption. If available this means that the UK holding company does not have to pay corporation tax on the dividends it receives.

If the holding company is a small company, then it doesn’t have to pay corporation tax on dividend received from subsidiaries either in the UK or overseas provided the UK has a double taxation treaty agreement and a few additional conditions are satisfied.

However, if the holding company is not a small company, then the dividend exemption may still be available if the dividend is paid by a company which the holding company controls provided certain other conditions are satisfied.

Capital gains tax

CGT is levied on the profit when you sell (or ‘dispose of’) something (an ‘asset’) like shares or property that’s increased in value. Companies do not pay CGT. Instead resident companies pay Corporation Tax on their chargeable gains which is currently set at 19%.

Non-resident companies are taxed only on gains from selling or disposing of assets they have in the UK or from deals signed through a representative office. Capital loss can be set off against capitals gains only, not income, during the current of future taxation periods.

For individuals, if you’re a basic rate taxpayer, the rate you pay depends on the size of your gain, your taxable income and whether your gain is from residential property or other assets. You are liable to 10% to 28% CGT. Non-residents must report about chargeable gains from selling property within 30 days after they have arisen.

VAT

VAT in the UK is charged on many things including business sales of goods and services by UK companies. It is applied at every step of supply chain, for title transfer and for provision of services. Every UK-based company must register for VAT with HM Revenue and Customs (HMRC) if VAT taxable turnover is more than £85,000.

The standard VAT rate is 20%; reduced rate is 5% for some goods and services, e.g. children’s car seats and home energy. Zero rate is charged on exported goods, most food and children’s clothes.

Stamp Duty Land Tax

Both resident and non-resident buyers must pay SDLT when buying a property or land in England and Northern Ireland. Rates vary based on the property value and legal status of a buyer. The current SDLT threshold is £125,000 for residential properties and £150,000 for non-residential land and properties, meaning that you only start paying SDLT on the property and land price above those figures. Historically, the SDLT rate in the UK was fixed for every property, but since 2014 it has been charged on increasing portions of the property price:

  • 0% for the first £125,000 of the property price;
  • 2% for the next £125,000 (the portion from £125,001 to £250,000);
  • 5% for the next £675,000 (the portion from £250,001 to £925,000);
  • 10% for the next £575,000 (the portion from £925,001 to £1.5 million);
  • 12% for the remaining amount (the portion above £1.5 million).

Example

If you buy a house for £275,000, the SDLT you owe is calculated as follows:

0% on the first £125,000 = £0

2% on the next £125,000 = £2,500

5% on the final £25,000 = £1,250

Total SDLT = £3,750

SDLT is charged at 15% on residential properties costing more than £500,000 bought by certain corporate bodies.

Inheritance tax and taxable gifts

All assets located in the UK are taxed at the current rate of 40% IHT of the market value of the property on the date of death if the value of the estate is below the £325,000 threshold. Property inherited by a spouse is exempt from taxation. For the rest of the estate, an untaxed allowance of £325,000 is provided. In some cases, this allowance can pass to a spouse and add up to their allowance, providing up to £1m of untaxed inheritance and other benefits to remaining beneficiaries.

There’s usually no IHT to pay on small gifts you make out of your normal income, such as Christmas or birthday presents. These are known as ‘exempted gifts’. There’s also no Inheritance Tax to pay on gifts between spouses or civil partners. People you give gifts to might have to pay IHT, but only if you give away more than £325,000 and die within 7 years. Find out more>

Tax residents and non-doms

Those who immigrated to the UK (so called non-doms) but keep receiving their main income abroad will benefit from the UK taxation system most of all. It’s important to define your tax residency status in the UK that can be done with a Statutory Residence Test. Our specialists will help you pin down your status in the UK for taxation purposes or plan it in advance. Determine your tax residency>

If you are a tax resident in the UK and receive income in any other country, you are liable to prepare and submit your personal tax return which is called Self-Assessment. Taxes may also arise when you are buying real estate in the UK. Besides, both UK residents and non-residents should be aware of IHT.

Our experts offer detailed and comprehensive consultations on relevant taxes and help you work out your taxation strategy.

UK taxation explained with Imperial & Legal

There are many taxes that you might have to pay when starting a business or buying property in London or anywhere else in the UK. We have an extensive knowledge of the English taxation system which enables us to give you advice on any matter and help you reduce costs when starting a business or buying real estate. We make sure that taxes you have to pay in the UK are reduced to a minimum or even nil.

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