It is sometimes said that the only things that are certain in life are death and taxes.
Whether we like it or not, we all pay tax on most of the financial exchanges we engage in. We pay taxes on our income, most of our consumption, our travel, and even our personal sales.
So, with so many taxes to keep up with, the tax experts at income-tax.co.uk compiled a list of the most popular tax questions asked online in the UK.
We are going to take a look at the questions they found and do our best to answer each of them.
What are the most popular tax questions asked online?
The most popular tax questions asked online largely relate to what the rate of tax is or what a particular tax actually means. Perhaps unsurprisingly, the most popular tax-related question asked online in the UK was simply, How much tax will I pay?
So let’s jump in and take a look at answering some of the internet’s most pressing tax questions.
How much tax will I pay?
In this question, the type of tax is not specified, but the one we all think of when it comes to paying our taxes is Income Tax.
The UK has a progressive Income Tax system, which means the more you earn, the more you pay. So how much Income Tax do you pay?
The following table outlines the thresholds for the different levels of Income Taxation in the UK:
|Band||Taxable income||Tax rate|
|Personal Allowance||Up to £12,570||0%|
|Basic rate||£12,571 to £50,270||20%|
|Higher rate||£50,271 to £150,000||40%|
|Additional rate||over £150,000||45%|
The tax rate is only on earnings within its band. So, if someone earned £100,000 per year they would pay no tax on the first £12,570, 20% tax on £12,571 to £50,270, and 40% tax on £50,271 to £100,000.
If you are employed by someone else, your tax will usually be deducted from your earnings. If you are self-employed, you need to complete a Self Assessment tax return. You can now complete your tax returns and file taxes online.
How much is my Car Tax?
Car Tax is paid every year. You need to pay Car Tax when your vehicle is first registered, which covers the first 12 months. You then pay Car Tax every year following that at a different rate.
When your car is first registered, you will pay a rate based on a vehicle’s CO2 emissions. You have to pay extra if your car is diesel and does not meet the RDE2 standard.
|CO2 emissions||Diesel cars that meet the RDE2 standard and petrol cars||All other diesel cars||Alternative fuel cars|
|1 to 50g/km||£10||£25||£0|
|51 to 75g/km||£25||£120||£15|
|76 to 90g/km||£120||£150||£110|
|91 to 100g/km||£150||£170||£140|
|101 to 110g/km||£170||£190||£160|
|111 to 130g/km||£190||£230||£180|
|131 to 150g/km||£230||£585||£220|
|151 to 170g/km||£585||£945||£575|
|171 to 190g/km||£945||£1,420||£935|
|191 to 225g/km||£1,420||£2,015||£1,410|
|226 to 255g/km||£2,015||£2,365||£2,005|
After the first 12 months, the cost of Car Tax is dependent on the type of fuel your car uses and the time frame you choose to pay the annual tax bill.
|Fuel type||Single 12-month payment||Single 12-month payment by Direct Debit||Total of 12 monthly payments by Direct Debit||Single 6-month payment||Single 6-month payment by Direct Debit|
|Petrol or diesel||£165||£165||£173.25||£90.75||£86.63|
What Council Tax band am I in?
In England and Scotland, the Council Tax band of a property is determined by the value of that property in 1991. In Wales, it is determined by the value of the property in 2003.
Depending on the value of the property at those times, it is then placed into a band ranging from A to H in England and Scotland, and A to I in Wales, with the A band being the cheapest. The cost of Council Tax varies between councils and it usually changes slightly each year.
If you want to find out what Council Tax band your house is in, you can use the government’s checker. You simply enter your postcode and address and it will tell you the band of Council Tax you are in.
How much can you earn before paying tax?
We have already touched upon the answer to this question in the first question on Income Tax. UK taxpayers have a tax-free Personal Allowance of £12,570. Any earnings over that threshold are taxable.
If you earn over £125,140 per year, then the tax-free allowance does not apply to you and you must pay the basic 20% rate on the £12,570 allowance.
What is Corporation Tax?
Corporation Tax, or Business Tax, is a tax paid by businesses based on the company’s profits.
You must pay Corporation Tax in the UK if you run:
- a limited company
- a foreign company with a UK branch or office
- a club, co-operative or other unincorporated association, eg a community group or sports club.
Corporation Tax in the UK is currently at 19%. It is set to rise to 24% in April 2023 for businesses with profits over £50,000.
Businesses are also able to claim a VAT refund on certain items bought for business purposes.
List of tax codes and what they mean
Your tax code appears on your monthly payslip from your employer and on your P60 or P45 forms. The code is made up of several numbers and a letter. The most common tax code is 1257L, which is the code used for most people who have one job or pension.
The number on your tax code refers to the amount of tax-free income you get in that tax year. So 1257 is the most common as most people get £12,570 of tax-free income.
The letters on your tax code are slightly more complex and refer to your situation and how it affects your allowance. ‘L’ means that you are entitled to the standard tax-free Personal Allowance.
How much is Inheritance Tax?
There is a £325,000 tax-free allowance on all inheritance in the UK. This means that if the sum total of your inheritance amounts to £325,000 or less, you will pay no tax. As this figure is relatively high, most people in the UK pay no inheritance tax.
However, if your inheritance totals more than the tax-free threshold, you must pay 40% on everything that exceeds £325,000. If you leave everything to your spouse, civil partner, charity, or community enterprise, then no tax needs to be paid. But if you do leave an inheritance to a spouse or civil partner the tax will be paid when they pass away.
The benefactors can pay a reduced rate of 36% on some assets if you leave 10% or more of the net value to charity.
How much is Road Tax?
Road Tax is a term used interchangeably with Car Tax. So, see our answer to the previous question, How much is my Car Tax?
What is Capital Gains Tax?
Capital Gains Tax is a tax on the profit you make on the sale of an asset that has increased in value.
For example, if you bought a painting for £5,000 and later sold it for £25,000, you gained £20,000, which is the taxable amount.
You pay Capital Gains Tax on the sale of most personal possessions worth more than £6,000, apart from a car.
The rate of Capital Gains Tax depends on the type of asset sold, the purpose of the sale, and the value of the seller. The basic rate for most regular taxpayers is 18%.
What is a Working Tax Credit?
Working Tax Credit is money that is provided by the government to boost the income of low-income workers. You can apply for Working Tax Credits if you are employed by someone else or are a self-employed worker. You can only make a claim for Working Tax Credit if you already get Child Tax Credit. If you are ineligible to apply for Working Tax Credit, you can apply for Universal Credit instead.
To apply for a Working Tax Credit you must work a minimum number of hours, which vary depending on your circumstances:
|Circumstance||Hours of work a week|
|Aged 25 to 59||At least 30 hours|
|Aged 60 or over||At least 16 hours|
|Disabled||At least 16 hours|
|Single with 1 or more children||At least 16 hours|
|Couple with 1 or more children||Usually, at least 24 hours between you (with 1 of you working at least 16 hours)|