The UK Tax System

Even in your country of origin, taxes can be a bit of a mystery – the rules are constantly changing, whose responsibility are they and new ones are always cropping up. In the UK it’s fairly clear cut (at the moment) so we focus on national insurance, VAT and council tax.

National Insurance contributions are payable on the earnings of people who work in the UK, and contributions are related to earnings. The benefits of the scheme include state retirement pension and cash benefits during unemployment or sickness.

Depending on your length of stay, if you are an EU member, etc, you may have to contribute to national insurance while working in the UK. Your HR department will advise you of the situation and will inform you if you should register with the Department of Social Security and how to go about it. After registration you will be sent a British national insurance number.

Expatriates who have residence in the UK and are employed by a UK resident employer have to pay UK income tax on earnings. This is collected through the Pay As You Earn system and is operated by employers, who deduct tax from your salary and pass it to Inland Revenue. Your HR department will ask you to complete forms P46 and P86.

Value added tax (VAT) is payable on most goods and services, with a few exceptions. As a visitor to the UK you may reclaim VAT on some goods if you export them within three months of purchase.

Council tax is based on your property’s size and the local amenities, and helps pay for local services. Where only one adult is resident in a property there may be a 25% discount. As an expatriate you may receive reduced council tax – contact the local council tax department for more information. In leased properties it is the tenant’s responsibility to ensure council tax is paid.