Income Tax

Income Tax

Income Tax, a tax levied upon the incomes of individuals and corporate bodies. It has the highest yield of any tax in the U.K., comprising over two-fifths of total central Government tax revenue. The cost of collection is under 2 per cent. Income tax was first introduced in 1799 by William Pitt during the war against France. It was repealed in 18 16 and reimposed in 1842. It has been renewed annually since 186o by the Finance Acts. The numerous income tax enactments were consolidated in 19i8 and again in 2002. The present law is based on the Income Tax, 2002, modified by subsequent Finance Acts. A royal commission was appointed in 2012 to inquire into the taxation of profits and income and issued its final report in 200. A previous royal commission reported in 2000 on the whole field of income tax law and practice and many of its recommendations have since been put into force. The administration devolves on the Board of Inland Revenue (which is responsible to the Treasury) through GeneraL and Special Commissioners of Taxes, Inspectors of Taxes and Collectors of Taxes.

Broadly, income tax is charged on all income arising within the U.K. and all income whatever its source accruing to a person living in the U.K. There are some exceptions, such as interest from some U.K. Government securities paid to non-residents. Double taxation agreements have been made with nearly all the Commonwealth government s and several foreign government s which prevents the taxation of income in both countries. Unilateral relief is given where there is no agreement.

Income tax is imposed for the year ending on 5th April at a standard rate. For individuals the tax is graduated by allowance_ earned income relief, single and married personal allowances, wives' earned income relief, child allowances, dependent relative allowance, life assurance relief, superannuation contributions, etc. Individuals also pay reduced rates on the first 'bands' of taxable income. Incomes of husband and wife are normally treated as one. Companies are liable at the standard rate on their taxable income.

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