Taxation terminology

This is the tax you pay on the income you receive. There are three main rates: 20%, 40% and 50%. Interest, dividends as well as earnings are liable to Income Tax. Everyone, including children, has an annual tax free allowance. This is useful to know when making any financial plans.

This is the tax you are liable for when you make a profit on certain types of assets, for example Stocks and Shares including Unit Trusts and OEIC’s, Holiday Homes, works of art or cars. Again we all have an annual allowance meaning that we can make gains up to a certain level and not pay tax. This allowance can help when deciding which investment to choose. There are two rates 18% and 28%.

This is the tax that is levied on not only the value of your Estate when you die but also on certain gifts made during your life time. Again there are a number of allowances that can be used to reduce or even mitigate any liability. We each have our own allowance known as the “Nil Rate Band”. This currently stands at £325,000.This can now, in certain circumstances be passed onto a surviving spouse or civil partner. In addition to this there are a number of gifts that you can make during your lifetime which will not be assessed when you die, thus reducing any potential liability.