United Kingdom is a sovereign country in Western Europe. Lying off the north-western coast of the European mainland, the United Kingdom includes the island of Great Britain, the north-eastern part of the island of Ireland and other small islands.
The United Kingdom is the 78th-largest sovereign state in the world and the 11th-largest in Europe. It is also the 21st-most populous country, with an estimated 65.1 million inhabitants. Together, this makes it the fourth-most densely populated country in the European Union (EU).
Economic Background of the United Kingdom
According to data collected by UK Trade & Investment (UKTI), the UK continues to attract direct foreign investment with growth in terms of projects and jobs.
The report analyzes how, over the last few years:
- The United Kingdom continues to attract investment projects, with annual average growth of around 12%;
- It is estimated that these investments generated 85,000 new jobs, up 51% over the previous year.
The UK tax system
The tax system currently in force in the UK is a system currently based on a double taxation binary managed by different entities; if in fact the HMRC (Her Majesty’s Revenue and Custom, equivalent to the Italian Revenue Agency) deals with tax c.d. central government of the country, on the other hand the issues related to taxation c.d. local authorities are charged with the various Councils, Local Bodies which in their substance carry out operations similar to those carried out in Italy by the municipal bodies.
Taxation in the United Kingdom
Her Majesty’s Revenue and Custom is the body that deals with taxation on a national basis of natural persons, trusts, corporations and the like, through the following types of tax:
- Income Tax, a tax used to tax incomes earned by natural persons in the tax period; this kind of taxation involve income from rent, employee income, self-employment and self-employment income and investment income. The net income from the sum of these types of income is then applied to the income tax the following rates:
Taxable income (other than dividends)
| Tax year 2016-17 | |
| Savings income- Exemptionuntil £ 5.000 | 0% |
| Personal Allowance – Exemptionuntil £ 11.000 | 0% |
| Basic Rate – Income between £ 11,000 and £ 43.000 | 20% |
| Higher Rate – Income between £ 43.000 and £ 150.000 | 40% |
| Additional rate -Income over £ 150.000 | 45% |
| Tax year 2017-18 | |
| Savings income- Exemptionuntil £ 5.000 | 0% |
| Personal Allowance – Exemptionuntil £ 11.500 | 0% |
| Basic Rate – Income between £ 11,500 and £ 45.000 | 20% |
| Higher Rate – Income between £ 45.000 and £ 150.000 | 40% |
| Additional rate -Income over £ 150.000 | 45% |
Different rates are foreseen for income arising from the distribution of d dividends, which are always taxed according to the system for stakes:
Dividends
| Tax year 2016-17 | |
| DividendAllowance -Exemptionuntil £ 5.000 | 0% |
| Personal Allowance – Exemptionuntil £ 11.000 | 0% |
| Basic Rate – Income between £ 11,000 and £ 43.000 | 7,5% |
| Higher Rate – Income between £ 43.000 and £ 150.000 | 32,5% |
| Additional rate -Income over £ 150.000 | 38,1% |
| Tax year 2017-18 | |
| DividendAllowance -Exemptionuntil £ 5.000 | 0% |
| Personal Allowance – Exemptionuntil £ 11.500 | 0% |
| Basic Rate – Income between £ 11,500 and £ 45.000 | 7,5% |
| Higher Rate – Income between £ 45.000 and £ 150.000 | 32,5% |
| Additional rate -Income over £ 150.000 | 38,1% |
For the purposes of the Income Tax, there are further or additional exemptions depending on the date of birth, civil status or situations of physical impairment; In addition, there are numerous deductions to be used in certain cases (only for example, for the payment of pension contributions, charitable donations, maintenance allowances, expenses related to their status as employees, etc.);
- Capital Gains Tax, tax used to tax gains on capital gains. All UK residents are subject to capital gains tax on both national and foreign capital gains. Tax on capital gains arising from the sale of companyassetsmay, however, be suspended if the proceeds are reinvested in goods of the same nature. Losses in the net taxable amount are deducted from any other capital gains obtained in the reference tax year and, in the event of excess, may be indefinitely reckoned to subsequent tax periods.
Capital Gains
| Tax year 2016-17 | |
| Tax-free Allowance – Exemption until £ 11.000 | 0% |
| Basic Rate – Income between £ 11,000 and £ 43.000 | 10% |
| Higher Rate – Income between £ 43.000 and £ 150.000 | 20% |
| Additional rate -Income over £ 150.000 | 20% |
| Tax year 2017-18 | |
| Tax-free Allowance – Exemption until £ 11.300 | 0% |
| Basic Rate – Income between £ 11,300 and £ 45.000 | 10% |
| Higher Rate – Income between £ 45.000 and £ 150.000 | 20% |
| Additional rate -Income over £ 150.000 | 20% |
The calculation of the Capital Gains Tax does not take place in accordance with a simple procedure for applying the tax rate to the taxable income incurred in the single tranche.
Conversely, the calculation procedure is more complex and can be summarized as follows:
- calculate the taxable income for the purpose of the Income tax (excluding capital gain);
- deduct from the capital gain the Tax-Free Allowance;
- add the gain to the taxable income and check the rate at which the income falls;
- apply the reference rate to the only capital gain.
If the amount received falls within the rate set for the base rates, the rate of 10% will apply (capital gain only, provided that generic taxable income is taxed in the manner described above otherwise, the capital gain will be taxed at a rate equal to 20%;
- Corporation Tax, a tax used to tax income earned by legal persons. The uncollectibleisdetermined on the basis of the accounting records held by the company, net of the fiscal variations provided by local law. From the tax year in progress (2015-16), the UK Government has decided to opt for the adoption of a single tax rate in Tax Corporation, eliminating the previous bands with exemption bills and stakes at a higher rate; therefore, at present, the taxation of corporate profits takes place at a single rate of 19%; for future tax periods, the UK Government has announced the approval of a single lower rate of 18% (2020- 21 and following); lastly, it should be noted that special rates are foreseen for businesses operating in the oil industry.
| Tax year 2016-17 | |
| Tax rate | 19% |
| Tax year 2017-18 | |
| Tax rate | 19% |
In the case of capital gains relating to assets or assets used by companies, the tax will not be paid through the Capital Gains Tax, but the related capital gain will contribute to the company’s profit in the Corporation Tax; it must be pointed out that it is possible to postpone the taxation of the capital gain in question if the company provides for a short period of time to use the proceeds of the sale of the asset to acquire another of the same species.
Since 2002, capital gains arising from the sale of equity investments are subject to the rules of participation exemption which, under certain conditions, introduces a case of exemption from the category of income in question: the rule allows to consider what “exempt” income, capital gains obtained by Disposal of Qualified Investments.
This condition applies in cases where:
- if you own at least 10% of the share capital of the subsidiary;
- if the holding has lasted for at least one year, prior to the sale;
- whether the acquiring company and the divested company carry out mainly a “Trading Activity”, or are in any case part of a group that mainly carries on business, or both are controlled by a company with the same characteristics;
- Inheritance tax, due in cases where succession or liberality acts or dispositions occur, involve assets or other property assets whose value exceeds the franchise of £ 325,000; the taxable amount of this tax is the depreciation of the assets produced by the disposition of the assets of the disposer, a reduction which does not necessarily coincide with the value of the asset or right transferred.
The tax applies only to assets located in the territory of the United Kingdom United Kingdom or where the domicile of the plaintiff is still located in the United Kingdom; on the contrary, if the property in question is not in the United Kingdom and even the domicile of the disputable person cannot be found there, the tax will not be due.
Inheritance tax is calculated by applying the 40% rate and must be paid by the expiration of the sixth month following the date of acquisition of the asset, except for certain special cases.
United Kingdom: investing in the successful sectors.
The city of London, unquestioned capital of the UK, is undoubtedly the essence of melting pot in Europe, bringing together different ethnicities, religions and cultures from all continents.
Unanimously acknowledged as the world’s financial capital since 2014, City’s financial industry has taken on an important advantage from the economic environment, the quality of the workforce, the development of infrastructures and the technology sector and by the convincing tax incentives proposed by the British Government, confirming this status in the last two years.
The presence in the city of all major world finance decision-makers, lenders from investment funds to the most famous London Stock Exchange, is yet another confirmation of this trend.
Regarding the lively development of the digital industry London, the importance of human resources available in the area and the many incentives to promote the development of the sector proposed by the local government have made it possible to develop, in the last decade, the London pole of Shoreditch, a neighborhood on the edge of the City which is now the main competitor of Silicon Valley in California thanks to the presence of the world’s leading software companies and the presence of more than 35,000 start-ups involved in the industry.
The presence of major financial institutions, investment funds and numerous innovative start-ups has certainly facilitated a new business venture commonly known as fin-tech, s which is the result of a fusion between the world of financial services and the world of high-tech services that deals with innovative solutions, tools and applications for banking and financial services, aimed at facilitating the use of such services by numerous users.
Today, with almost 3 billion global investments in financial technology initiatives and a sector of record-breaking growth over the last five years, fin-tech is at the same time one of the most interesting and profitable challenges the City of London is preparing to undertake.
UK Industry sectors
- Advanced manufacturing
- Aerospace
- Asset management
- Automotive
- Creative
- Energy generation
- Financial technology
- Food and drink manufacturing
- Nuclear
- Offshore wind
- Oil and gas
- Retail