PERSONAL TAXATION IN THE UK
Let’s, firstly, study how personal taxation is structured in the UK and secondly, how it is levied. Contrary to popular opinion, UK personal taxation is both simple and relatively low. There are two rates: 25 per cent on taxable income up to £ 23, 700, and 40 per cent on income above this figure. Like in most countries, there are series of deductions and allowances which can be taken into account before arriving at net taxable income figure. The major one relates to the status of the individual: a single person's allowance at present stands at £ 3, 295, while a married person's allowance is currently £ 5, 015. It should be mentioned that the government has recently introduced legislation which allows married couples to opt for separate taxation. Other allowances or deductions which are common are, firstly, tax relief on private pensions. At the moment this is allowable up to 17.5 per cent of total income, up to the age of 35, rising to 40 per cent above 60 years old. Also the much vaunted tax relief on mortgages or loans to buy a house - here there is currently 7 per cent tax relief on the interest payable to the bank or building society up to a maximum of £ 30, 000 capital borrowed. The percentage relief obviously depends on the interest rates that are operative at any one time. And now let’s move on to how personal tax is levied. The Inland Revenue obliges employers to operate a PAYE (Pay As You Earn) scheme, which means the tax is deductible at source. In other words, by the employer before making out the monthly salary cheque or bank transfer to the employee. The tax is then collected direct from the employer. At the same time it should be mentioned that the employer is obliged to deduct National Insurance from the employee's salary - the employee's contribution being roughly 9 per cent of income, the employer's ranging from 5 to 10 per cent. These are approximate figures.. Vocabulary
Exercise 3 Complete the information in Charts 1 and 2.
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