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How to file taxes in the United Kingdom?

How to file taxes in the United Kingdom?

05 Jan 2022

Do you have any idea how to file taxes in the United Kingdom? 


Here, you will find complete information about the process of filing taxes in the UK. Pakistani expatriates find the UK one of the best countries to relocate to for better employment opportunities. After finding jobs, their next primary concern is to send money to Pakistan, which they mostly do through ACE, the world’s best online money transfer company. But to get jobs in the UK and to transfer funds requires basic knowledge about taxes since whether you earn or incur expenses, taxes apply. Therefore, understanding the tax mechanisms of countries like the UK with stringent tax regulations is important.


A look at British tax volume:- The institution responsible for administering and collecting taxes in the UK is Her Majesty’s Revenue and Customs (HMRC). In the fiscal year 2019/2020, the UK’s tax receipts reached about 633.4 billion GBP, increasing 2.1% from the preceding tax year.


Basic taxes:- Basic taxes in the UK are income tax, property tax, UK inheritance taxes, capital gains, and Value Added Tax (VAT). Many of these taxes are progressive taxes. 


Progressive tax:- A progressive tax is not static. It is determined on the taxpayer’s earnings; with higher incomes, rates of progressive taxes increase. 


Federal taxes: The UK government collects taxes at three tiers, including the central government (HMRC); devolved governments, including Scotland’s and the local governments. The central taxes HMRC regulates are income tax, corporation tax, capital gains tax, inheritance tax, insurance premium tax, stamp, land, and petroleum revenue tax, environmental tax, climate change, aggregates levy land landfill tax, VAT, customs duty, and excise duty.


Goods and services:- Value Added Tax (VAT) applies to all goods and services. Even if you bring goods to the UK from abroad, VAT will apply if the stipulated limit is exceeded. 


VAT refund:- Non-residents can purchase tax-free during their stay in the UK. Besides, they are entitled to claim a refund on any VAT they have paid for the goods they have purchased but on the condition that they will take those goods along with them on leaving the UK. 


VAT refund exemptions:- A few of the items are exempted from VAT refund that include: hotel services; goods used partly like edibles and scents; motors and boats; goods valuing more than 600 GBP that are exported for businesses through a form known as C88; goods exported as freight and items requiring export license except antiques; gemstones that not mounted; and items through internet sales.


How to pay:- Mostly, the taxes are automatically withdrawn from the paychecks of the employers.

Taxes for non-residents:- In the UK, foreigners have to pay almost the same as the residents. 



Taxes for STBV:- In a given tax year, if someone spends less than a year or less than 183 days, will be considered as a Short Term Business Visitor (STBV). For such people, tax regulations are slightly different from usual.

 Incomes exempted from tax in the UK:- Following are the few tax-exempted incomes.


  • Transportation costs that you incur during relocation of a working person or family;
  • Lotteries or game-winning prizes;
  • Service awards. These have certain limits;
  • Saving account with up to 20,000 GBP and interest on these;
  • Pensions paid to war widows and dependants;
  • Few social security benefits such as maternity allowance, housing benefit, and employment allowance, etc.


Filing tax returns:- In the UK tax year starts from April 6th of the current year till April 5th of the following year. It makes the current tax or fiscal year noted as 2021/2022. You can do so by post also, but you need your Unique Tax Reference (UTR) number that you can get from your previous tax returns from HMRC or the competent authority’s website. 


Deadlines to file returns:- Following are the two deadlines to file returns.

  • October 31st in case you file paper returns; and 
  • January 31st in case you file online returns.


Penalties:- If you cannot file your returns within three months after the deadline, you will be liable to pay 100 GBP as a penalty. You may have to pay an additional 10 GBP daily if you cannot file your returns after three months since the deadline. And if you cease to file a return for six months, you will be charged with a fixed penalty of 300 GBP or 5% of your total tax liability. These penalties increase with the time-lapse, and in some cases, you may have to pay a whopping 200% of your total tax liability if the failure to file returns spans 12 months. 


Conclusion:- This article has hopefully served as a comprehensive guide covering all the important information regarding the tax regime in the UK. It shows that the UK’s tax regime is fairly simple and plain. The taxpayer must ensure to meet the deadlines strictly to avoid hazards. 







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