UK Taxation System Essay Example | Topics and Well Written Essays - 2250 words

UK Taxation System - Essay Example Alongside, the developments in the indirect taxation are also described. Income Tax is believed to be the largest source of earning equating up to 30% of the total tax revenue in UK. This is charged on salaries from employment, on rental income for let-out properties, on bank and building societies' interests and on company dividends. The one that comes next in this list is the Value Added Tax (VAT). VAT is charged to the customer by businesses on the supply of goods and services in the country. The revenue generated by the UK government by way of VAT comes somewhere around to 23% of the total tax revenue and also this is believed to be the second largest earner of revenue to the government. Apart from this the government of UK also generates revenue through some other kinds of taxes like the National Insurance Contributions (NIC), duties and Corporations Tax, the contribution of which are believed to be 21%, 16% and 8% respectively. There exist also other sources of contributions like the Capital Gains Tax (CGT), Inheritance Tax (IHT), Stamp Duty (SD) and Stamp Duty Land Tax (SDLT) etc., which form the rest of the total tax revenue. The Tax Year: The Tax Year in the United Kingdom starts on the 6th of April in the current year and ends on 5th of April in the following year. All the citizens of the country pay their income tax by reference to the same. The different kinds of rates and allowances relating to taxes are finalized in the Annual Budget which is scheduled every year in the month of March. The Tax System: A study conducted in the previous year reveals that almost 29.5 million individuals do pay tax in the form of income tax in UK. Indirect taxes are collected in the form of Excise duties, Vehicle excise duties, Insurance premium tax, Air passenger duty, Landfill Tax and Aggregates Levy etc. The government of UK levies excise duty particularly on five types of goods. They are tobacco, fuel, beer, wine and beer. A flat rate is followed for levying tax on these particular goods. When it comes to tobacco, they are additionally subject to a tax called ad valorem tax. This ad valorem tax is set up at an amount of 22% of the total retail price. The following table shows the tax rates of duties that were levied in the year 2006-07. Table.1 Excise duties, 2006-07 Good Duty (pence) Total duty as a % of price Total tax as a % of price Packet of 20 cigars: Specific + ad valorem 314 66.4 81.3 Pint of Beer 29 13.5 28.4 Wine (75cl bottle) 129 38.2 53.1 Spirits (70cl bottle) 548 48.0 62.9 Ultra-Low sulphur petrol 47 50.8 65.7 Ultra-Low sulphur diesel 47 49.1 64.0 Sources: HM Revenue and Customs website (customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal'_nfpb=true&_pageLabel=pageExcise_InfoGuides); UK Trade Info website - www.uktradeinfo.co.uk; National Statistics - www.statistics.gov.uk Capital Gains Tax: The concept of Capital Gains tax was introduced in the year 1965. These capital gains are supposed to be levied on the