UK vs. India: Key Differences in Taxation Systems

Tax is an essential component of a modern economy, through which the government provides its citizens with basic public services and infrastructure. There is an abundance of different tax types, such as income tax, property tax, corporate tax, sales tax, value-added tax (VAT), excise and customs duty, and a substantial number of taxes to boot. Regardless of which taxes people pay, the system can be quite complicated depending on the number of exemptions, deductions, and credits for both natural and artificial people.

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.

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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.

Source – Income Tax India

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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.

FAQs on UK vs. India: Differences in Taxation Systems

How do the income tax rates compare between the UK and India?

India has a progressive slab system with rates ranging from 5% to 30%, while the UK has a higher starting rate of 20% and a top rate of 45% on higher incomes.

What are the main differences in corporate taxation?

The UK has a standard corporate tax rate of 25% for companies with higher profits, while India’s corporate tax rates are generally 25% or 30%, depending on the company’s revenue.

How is tax on capital gains different in both countries?

India taxes long-term capital gains on shares at a 10% rate. In contrast, the UK has a 20% capital gains tax rate on assets like shares, with a higher rate on residential property.

Is there an agreement to avoid double taxation between the UK and India?

Yes, the UK and India have a Double Taxation Avoidance Agreement (DTAA), which ensures that individuals and companies aren’t taxed on the same income in both countries.

How does the tax filing process differ in the UK and India?

In the UK, you typically file a self-assessment tax return only if you are self-employed or have untaxed income. In India, tax returns are mandatory if your income exceeds a certain threshold.

Are there different types of property tax in both countries?

Yes. The UK has a Council Tax, based on a property’s value, while India’s property tax is usually calculated based on the property’s annual rental value.

Partham Barot is an ACCA-certified professional. showcasing his expertise in finance and accountancy. he’s revolutionising education by focusing on practical, real-world skills. Partham’s achievements underscore his commitment to elevating educational standards and empowering the next generation of professionals.