Taxes in England: Key Facts and Tips for 2024

Types of Taxes in England

Income Tax:

• Basic Income: Income tax is progressive and depends on the amount of annual income. The basic rates for 2024 are: 20% for income up to £50,270, 40% for income between £50,271 and £150,000, and 45% for income over £150,000.
• Personal Allowance: Every individual is entitled to a personal allowance, which for 2024 is £12,570. This means the first £12,570 of income is tax-free.

Value Added Tax (VAT):

• Standard Rate: The standard VAT rate in England is 20%. Reduced rates of 5% apply to certain goods and services, such as household energy, and there is a zero rate for essential items like basic food, children’s clothing, and books.
• VAT Registration: Businesses with an annual turnover exceeding £85,000 are required to register for VAT and submit periodic returns (GOV.UK).

Corporation Tax:

• Rate: Corporation tax is 25% for large companies, while small companies with incomes up to £50,000 pay 19%.
• Filing Returns: All companies are required to file annual corporation tax returns and make advance payments (GOV.UK).

National Insurance Contributions (NICs):

• Employees and Self-Employed: National insurance contributions are paid by both employees and employers, while the self-employed pay their own contributions. Rates vary depending on income and insurance status (GOV.UK).

Changes and Updates for 2024

Digitalisation of Tax Reporting:

• Making Tax Digital (MTD): The introduction of MTD aims to modernize the tax system through digitalization. Starting in 2024, all businesses will be required to maintain digital records and submit tax returns using compatible software. This will reduce errors and increase efficiency in the tax process (GOV.UK).

Basis Period Reform:

• From April 2024, self-employed individuals and partnerships will be required to submit tax returns based on the tax year (ending April 5) rather than their accounting year. This change will simplify the process and prevent double taxation (GOV.UK).

Tips for Effective Tax Planning

• Use Professional Software: Implementing MTD-compatible software can significantly simplify bookkeeping and tax filing.
• Consult a Tax Specialist: Professional advice from a tax consultant or accountant can help you navigate the complex tax system and avoid potential penalties.
• Plan Advance Payments: Ensure you are aware of deadlines for advance tax payments to avoid interest and late payment penalties (GOV.UK).