UK vs. India: Key Differences in Taxation Systems
Last Update On 30th December 2024
Duration: 5 Mins Read
Taxation is part and parcel of every modern economy through which governments provide their people with basic public services and infrastructures. There are also many types of taxes, like income tax, property tax, corporate tax, sales tax, value-added tax, commonly known as VAT, and excise tax, including the customs duty, to name a few. The tax system becomes complex with lots of exemptions, deductions, and credits for individuals and companies alike.
The UK and Indian taxation systems are alike but yet different in several aspects. This article explains Indian as well as UK taxation. If you want to master taxation and establish yourself as a finance professional, you can consider taking up an ACCA course, which is one of the most popular UK taxation courses in India.
Also, if you’d like to know more about the scope of an ACCA, read our blog “ACCA Career Scope and Job Opportunities in India and Abroad”.
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Difference In Income Taxes
Income tax systems between the UK and India vary significantly. This report seeks to outline these differences:
Income Tax
Income tax rates in the UK are normally more expensive than in India. The UK’s introductory income tax rate is 20% (for income up to £50,270), while the highest rate is 45% (for income of over £150,000).
In India, the minimum tax rate for individuals is 5% (for income above INR 2.5 lakhs), and the maximum tax rate is 30% (for income above INR 10 crores).
Deductions And Exemptions
The UK and India also have different types of deductions and exemptions under the income tax systems. In the UK, the taxpayer has different tax reliefs and allowances that he can claim on his income, like personal allowances, which reduce his taxable income.
Various kinds of deductions and exemptions available here in India include certain kinds of investments, medical expense savings, education expense savings, and so forth.
Tax Filing
In the UK, a tax return is required to be filed by the taxpayer if he has income not taxed at source or is self-employed. In India, taxpayers are generally liable to file a tax return if their income exceeds a certain threshold, irrespective of the source of income.
The Difference In Property Taxes
The property tax systems in the UK and India are different in several ways. Here are some of the key differences:
- In the UK, property tax depends on the value of the property. This tax is known as Council Tax. The local council determines the amount of tax payable by assessing the property’s value.
In India, property tax is usually based on the property’s rental value.
- The property tax rates in the UK and India vary depending on the location and value of the property. In the UK, Council Tax rates are set by local councils, with the average rate for a Band D property in England for the financial year 2021/22 being around £1,895.
In India, property tax rates are set by the local municipality and can range from 0.2% to 2% of the property’s annual rental value.
Difference In Corporate Taxes
The corporate tax rates in the UK and India are also different. Here are some of the key differences:
- In the UK, the standard corporate tax rate is 19%, which applies to all companies with taxable profits.
In India, the standard corporate tax rate is 25% for companies with a turnover of up to INR 400 crores and 30% for companies with a turnover over INR 400 crores.
- In the UK, dividends paid by UK companies are subject to a dividend tax set at 7.5% for basic rate taxpayers and 32.5% for higher rate taxpayers. The dividend tax rate is 38.1% for additional rate taxpayers.
In India, dividends are subject to dividend distribution tax (DDT), which is currently set at 15% plus surcharge and cess.
- In the UK, companies are subject to capital gains tax (CGT) on selling assets such as property or shares. The standard corporate CGT rate is 19%, which applies to all companies with taxable gains.
In India, companies are also subject to capital gains tax on the sale of assets. This rate varies depending on the asset type and the time it was sold.
Similarities Between The UK And Indian Taxation Norms
There are some similarities between the UK taxation laws and Indian taxation laws. Here is a look into the similarities between the taxes of the two countries:
Indirect Taxation
The indirect taxation system in both countries adds a tax component to the final price of goods and services. Businesses are responsible for collecting and remitting the tax to the government.
Tax Treaties
Both the UK and India have signed various tax treaties with other nations to avoid double taxation and promote international trade and investment. These treaties usually cover income taxes, capital gains, and dividends earned by individuals and businesses. These treaties facilitate global commerce and economic growth by reducing the tax burden on cross-border transactions.
More Questions Regarding The ACCA Course
Wrapping Up
With the increasing complexity of tax laws, there is a growing demand for tax professionals with specialised knowledge in specific areas of taxation both in India and the UK. An ACCA course is one of the most in-demand UK taxation courses online that one can take up to pursue a global career in taxation. This certification offers excellent UK taxation jobs in India and abroad.
If you need help establishing yourself as an ACCA, read our blog “How to Make a Career in ACCA? What are Some of the Best Jobs?”
Zell Education is the ultimate destination for anyone who wants to be a certified ACCA. Zell Education hires professionals with experience in the industry to teach their courses, offers an online learning platform, and guarantees assistance with job placement. Visit Zell Education for additional information about the ACCA program.
FAQ
What is UK corporation tax?
UK corporation tax is a tax on the profits of UK resident companies and non-UK resident companies with a UK permanent establishment. The current rate of corporation tax in the UK is 19%.
Do Indians have to pay taxes in the UK?
Whether an individual from India has to pay tax in the UK depends on several factors, such as their residency status, their source of income, and the terms of any tax treaty between the UK and India.
Do the UK and India have double taxation?
The UK and India have a double taxation avoidance agreement (DTAA), which prevents individuals and companies from paying double taxes on their earned income.
What are the jobs for CA?
A CA’s role in taxation involves tax planning, compliance, and advisory services for clients. They also represent clients in tax audits, assessments, and litigation matters and provide due diligence services for clients involved in mergers and acquisitions.
To know more about the best CA institutes, CA jobs in India, and CA salaries, read our blog “A Complete Guide To Chartered Accountancy (CA) Course.”