Locating in the UK - Taxation

Taxation for you and your business

- spend at least 183 days in the UK during any tax year - from 6 April to 5 April

- are planning to stay in the UK for at least two years

- come to the UK to visit for an average of more than 90 days per tax year over four years - residence is valid from the beginning of the fifth year

If you are resident but not permanently resident in the UK, you will only have to pay tax on any overseas income that you bring into the UK. However, income generated in the Irish Republic is taxable whether or not it is brought into the UK.

Personal taxation rates for 2006/07 are set at:

- 10 per cent on the first £2,150

- 22 per cent on income between £2,151 and £33,300

- 40 per cent on income over £33,300

Company taxation
You must pay corporation tax if your company is resident in the UK. Corporation tax is payable on worldwide profits after they have been adjusted for tax purposes.

The rates of corporation tax for a single company for 2006/07 are:

- 19 per cent for companies with profits of up to £300,000
- between 19 per cent and 30 per cent for companies earning profits of between £300,001 and £1.5m depending on where your profits fall within that band
- 30 per cent for companies with profits of more than £1.5m

Value Added Tax (VAT)
VAT is a charge that you normally pass on to your customers. However, it is the supplier of the goods and services who is ultimately liable to pay the tax.
VAT will apply if:

- you supply goods and services in the UK or the Isle of Man

- your taxable turnover is more than £61,000

The three rates of VAT are:

- 17.5 per cent - this applies on most goods and services
- 5 per cent - on fuel and power used in the home and also by charities
- zero - this applies to many different items, including most food, books and newspapers

Some business supplies are not subject to VAT and do not form part of taxable turnover. These include insurance as well as some types of selling, leasing and letting land and buildings, but excluding garages, parking spaces, hotels and holiday accommodation. See our guide on VAT: the basics.
National Insurance

Most working people in the UK have to pay National Insurance contributions (NICs), which are collected by HMRC. There are six types of NIC, some of which are paid at a flat rate and some which are linked to earnings. See our guide on National Insurance: the basics.

PAYE
As an employer, you are responsible for deducting income tax and NICs from your employees' pay and submitting these payments to HMRC. The system for collecting income tax from pay, as employees and directors earn it, is known as PAYE (Pay As You Earn).