All governments need money to pay for the communal services which they provide – defence of the realm, the justice system, the roads, police etc – and this they must raise from the population who benefit from these services.
Taxes come in a wide range of forms, from the obvious such as direct deductions from your pay via income tax to the more hidden ones such as a fuel duty onto which VAT is also added or taxes on your house insurance. Companies pay corporation tax on their profits and local councils pay landfill tax on disposing of the rubbish they collect from your bins. The list goes on but on these pages we will concentrate on the ones which affect you directly.
Who pays taxes?
Broadly, anyone living in this country and whose incomes exceed certain minimum levels will pay tax. There are variables to this if you are working here from overseas, such as your length of stay and family origin, which can make your tax obligations different.
Income tax is payable by anyone of any age with sufficient income from taxable sources whereas national insurance is only payable between 16 and state pension age on income from work. Everyone will pay the “indirect” taxes – VAT, stamp duty, alcohol duty etc – automatically when they pay for goods or services.
Who collects taxes?
His Majesty’s Revenue & Customs (HMRC) assesses and collects all taxes on behalf of HM Treasury, usually through employers (using PAYE) and providers of goods and services or occasionally directly via self-assessment (see the page on income tax below). All the different rates and amounts, however, are set by Parliament from time to time.
Now read the next pages which will explain the difference between income tax and national insurance and give a general overview of both, together with links to useful pages which will go into more detail on particular topics.
