5 Extended Diploma in Accounting: Taxation in the UK

This report provides a comprehensive overview of the UK taxation system. It begins with an introduction to the different levels of government involved in taxation, including the central, devolved, and local governments, and their respective sources of revenue such as income tax, VAT, and council tax. The report details the role of HM Revenue and Customs (HMRC) in administering and collecting taxes, and highlights the importance of income tax as a contribution to public services. The report then delves into the specifics of the self-assessment tax system, explaining its nature, purpose, and the process of determining taxable amounts and calculating tax payable. Furthermore, the report touches on corporation tax and VAT, although without providing extensive details. The report concludes by referencing books and journals used in its preparation.

5 Extended Diploma in
Accounting

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
Explanation of the nature and purpose of self-assessment tax....................................................4
Determination of taxable amounts and calculation of tax payable for a given scenario.............4
Including a completed self-assessment tax return.......................................................................4
TASK 2............................................................................................................................................5
TASK 3............................................................................................................................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
In the United Kingdom, taxation may be paid to at least three levels of government: the
central government (Her Majesty's Revenue and Customs), devolved governments, and local
governments. Income tax, NI contributions, VAT, corporate tax, and fuel charge are the main
sources of revenue for the central government. Grants from the federal government, business
rates in England, Council Tax, and, increasingly, fees and levies such as those for on-street
parking, are the main sources of revenue for local governments. Total government income for the
fiscal year 2014–15 was expected to be £648 billion, or 37.7% of GDP, with net taxes and
National Insurance payments totaling £606 billion. Everyone who makes money or works in the
United Kingdom is required to pay UK income tax. In the United Kingdom, around 32 million
individuals pay taxes. Different UK tax regulations, on the other hand, influence how income tax
is collected. Scotland's tax bands differ somewhat from those in England, Wales, and Northern
Ireland. The laws for UK tax residents and non-residents are also varied. Residents must pay
income taxes on their global earnings in the UK, whilst non-residents are only taxed on income
earned in the UK. Income tax is your contribution to the UK government's spending on
transportation, the NHS, and the education system. The wages affect the amount of UK income
tax people pay. In the United Kingdom, HM Revenue and Customs is in charge of income tax
(HMRC).
As the UK's tax, payment, and customs agencies, it taxes both domestic and foreign incomes
of everyone resident in the country. Employment and benefits from the job, profits from one’s
own business, state benefits, pensions, rent, interest from savings, dividends from a trust, and
other sources of income are all possibilities.
HM Revenue and Customs (HMRC) is in charge of tax administration and collection in the
United Kingdom. In 2020/21, the UK's tax collections were estimated to be at £584.5 billion,
down 7.7% from the previous tax year.
Income taxes, property taxes, capital gains taxes, UK inheritance taxes, and VAT are all
examples of basic UK taxes. Many of them are progressive taxes, which means that individuals
with higher earnings pay more.
England, Scotland (though there are some special distinctions due to Scotland's distinctive
legal system), Wales, Northern Ireland, and several of the smaller islands off the British coast are

all covered by the British fiscal system. It also covers oil drilling platforms in British territorial
seas, while the Channel Islands and the Isle of Man are excluded.
With the exception of a minor exception for income taxes, the UK tax system regards
spouses as separate entities and taxes them as individuals.
The following report highlights the three different cases and how the UK government taxes
in these scenarios. The first task explains the case of self – assessment tax. It is explained in the
report using a detailed illustration and provided tax rates. The task two highlights how the UK
government taxes the different corporations which are working in the UK. And in the third task,
VAT is explained and how different goods and services are taxed using VAT is explained.
TASK 1
Explanation of the nature and purpose of self-assessment tax
HM Revenue and Customs (HMRC) utilises the Self - Assessment system to collect
income tax. Wages, pensions, and savings are often taxed automatically. Other income
(including COVID-19 grants and support payments) must be reported on a tax return by
individuals and enterprises. It is a progressive tax, that means the higher the income higher the
tax payment for the individual is. Fill out a Self - Assessment tax return after the end of the tax
year (5 April) to which it relates. The Self-Assessment Tax is the remaining tax due on a
taxpayer's assessed income after the advance tax and TDS for filing the Income Tax Return have
been subtracted. Because the income tax return cannot be filed until all taxes have been paid, the
self-assessment tax serves as the final option to pay the taxes before completing the income tax
return.
Self-Assessment Tax is a tax that an individual pays in connection to other sources of
income. TDS may not have been deducted or may have been deducted at a lesser rate if the
taxpayer loses out on any revenue while completing the final payment. While there is no specific
payment date, the tax is always paid at the end of the year. Paying it as soon as feasible can assist
you avoid paying interest on the tax debt. This tax must be paid before the Income Tax Returns
can be submitted; thus, it must be paid during the same assessment year.
Determination of taxable amounts and calculation of tax payable for a given scenario.

Including a completed self-assessment tax return
TASK 2
corporation tax
TASK 3
VAT
CONCLUSION

REFERENCES
Books and Journals