TAXATION

Taxation



Taxation

Introduction

Almost everyone in the United Kingdom has to pay income tax, except for some people who are exempted. Those who pay must be aware of the tax system in detail. Mr. Thomas will gain knowledge of the basics of the tax system in the UK. The client will also learn about the details about the national insurance contributions and the corporation tax. After numerous ad hoc changes in its structure, the tax system was developed in the UK. The description of the tax system is not made in terms of the marginal rate schedule that taxpayers are obligated to pay. This makes it difficult for people to understand the complex tax system. The government should have made the description such that it would explicitly describe the system in terms of the marginal rate schedule (Cch, 2010, pp.96). This would simplify things for the general public. The goal of each and every business is to improve its efficiency and effectiveness, as well as, offer the best value to their customers. The customers are internal and external ones, with the internal being the employees.

Since the early 1990s, the basic structure of the UK income tax system has become more complex. There are some tax allowances that were introduced like the married couple's allowance. Such allowances have been converted into non- refundable tax credits. Additionally, the changes made to the mortgage interest tax relief have had positive effects. These effects are similar to a refundable tax credit. The current tax system, the basic one, holds an allowance and rate/ band structure (Hugh, 2010, pp.56). However, the combined effect of the said elements does not have correspondence to the structure of marginal rates faced by taxpayers.

Income tax is the largest source of revenues for the government, followed by the National Insurance Contributions. The smallest contribution in terms of revenues for the government comes from corporation tax. From April 6 of one year to April 5 of the next year is the period of the tax year. The previous tax year was April 6 2010 to April 5 2011. The dates of the tax year are quite odd, but they have been like this since the mid- 18th century. The United Kingdom adopted the Gregorian calendar in September of 1752, replacing the Julian calendar. There was a difference of 11 days between the two calendars, but the tax authorities did not want to lose out on the 11 days of tax revenues. Hence they set the odd dates for the tax year (Cch, 2012, pp.85).

Another name for the tax year is Fiscal Year, but it is different from the Financial Year. The Financial Year is used for the purposes of corporation tax. The period of the Financial Year is from April 1 to March 31.

Discussion

Income Tax

There are two different levels of government that are involved in taxation. One is the central government (HM Revenue and Customs) and the other is the local government. The revenues of the central government comprise mainly of income ...