United Kingdom - Taxation

Taxes on income include a graduated individual income tax and a corporation tax. Although personal income taxes are still high, they have been reduced several times since 1980.

In 2002 the corporate income tax had three brackets: a 10% rate was charged on taxable profits up to £10,000, with marginal relief up to £50,000. 20% was charged on profits between £50,001 and £300,000, with marginal relief up to £1.5 million. The 30% rate was applied to the increment of profits above £1.5 million. In 1997, the rate of this tax was 33%, with a reduced rate of 24% for companies with profits below £300,000 annually. There is a 50% petroleum tax assessed on profits from all exploration and production which is deductible from other corporate tax.

Income tax is charged on all income that has its origin in Britain and on all income arising abroad of persons resident in Britain. However, the United Kingdom has entered into agreements with many countries to provide relief from double taxation. In 2002, the income tax schedule had three brackets: 10% for taxable income up to £1,800; 22% on the next increment of income to £29,400; and 40% on the increment of income above £29,400. Inheritance taxes are 40%. Each taxpayer's marginal rate applies to capital gains in excess of £6,000. The main local taxes are land assessments, or "rates."

In January 1973, a value-added tax (VAT) was introduced with a standard rate of 10%, replacing the purchase tax, and bringing the UK's tax policy into harmony with the EU. In 1991, the standard rate was increased to 17.5% and in 1997, the reduced rate, applied to some medicines, medical equipment, heating oil, gas, electricity, small service businesses and some transportation services, was lowered from 8% to 5%. A zero rate applies to most foods, books, newspapers and periodicals, and certain other goods. Services such as insurance, health, education, and land and rents are also exempt. Other taxes are levied on petroleum products, tobacco, and alcoholic drinks. There are also various stamp duties.

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