The Tax Breakdown – Types of Taxes

“The hardest thing in the world to understand is the income tax” – Albert Einstein

Finance Stock photos by Vecteezy

What other taxes should I be aware of?                                                                          

We could be here all day listing various taxes, so here are a few important ones to begin with:

Council Tax:

This is paid in 10 monthly instalments to the council, used to provide services such as rubbish collection, transport services, and leisure projects to name a few. However, do not worry, as if you are a student, you are exempt from council tax! Further reasons to not pay council tax include low-income persons, care leavers and prisoners (unless you are in prison for not paying council tax!).

Capital Gains Tax (CGT):

Capital gains is the tax you pay on the profits from selling capital (It’s in the name!). Similarly to income tax, there is a 0% tax rate on some of your profit, then after that you pay 15%, then 20%, depending on earnings.

Inheritance Tax:

This is the tax you pay on the ‘estate’ of someone who has passed away, that is for any proceeds over £325,000. Initially, the inheritance tax rate is 40%! Although it may seem strange to impose a tax on this, note that the idea behind inheritance tax is to reduce the benefits people get from generational wealth. There are exemptions that do not face inheritance tax, such as money left to spouses and charities, amongst other things.

Benefits:

The UK Welfare system aims to give people support in times of high costs of living. This is partly carried out through the Job Seekers Allowance, which is paid to those who are actively searching for jobs, that can start in the next 48 hours. If you are under 24, this allowance is up to £71.70 weekly. Carers Allowance provides financial support for people who provide care to family members. Housing Benefit is available to support people with the costs of rent. Finally, Universal Credit was introduced in 2013, which combines multiple types of benefits into one monthly payment.