United States
The Internal Revenue Service (IRS) is responsible for collecting and administering income tax in the United States. The tax rates range from 10 percent to 37 percent, although they typically fall in that range.
The tax system in the United States is progressive, which means that persons with higher taxable incomes are subject to higher tax rates. Because there are no thresholds below which income is exempt from taxation in the United States, all earnings are subject to payment of taxation.
The United States currently has seven different tax brackets for individuals subject to the federal income tax: the 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent brackets. The bracket shifts depending on the taxpayer’s filing status as well as the amount of income that is taxable.
The tax rate ranges from ten percent for those making less than nine thousand eight hundred fifty dollars to thirty-seven percent for those making more than five hundred twenty-three thousand dollars.
If you are married, you can file your taxes jointly with your partner. In this scenario, the amounts for the various income bands will be increased by a factor of two, but the percentage will remain the same.
In the United States, you are required to pay federal income tax as well as state taxes in some of the states. For instance, the state tax rate in New York is 8.8 percent, and you are required to pay it.
Tax rate brands | Income 22/23($) |
10% | 0 to 9,875 |
12% | 9,876 to 40,125 |
22% | 40,126 to 85,525 |
24% | 85,526 to 163,300 |
32% | 163,301 to 207,350 |
35% | 207,351 to 518,400 |
37% | more than 518,401 |
Social contributions
United Kingdom
In the United Kingdom, social contributions are referred to as National insurance contributions (NICs). These social contributions include pension plans, health insurance, unemployment insurance, worker’s compensation, and the cost of welfare.
Workers are responsible for paying 13.25 percent of their gross wages into the social security system. The national insurance contribution (NIC) is 13.8 percent of an employee’s wage for the employer, and this percentage also extends to employee benefits like company cars.
If you are self-employed, you are required to make payments at a rate of 10.25 percent on any income between £9,880 and £50,270 annually. You will be subject to an extra rate of 3.25% if your income exceeds that threshold. In addition, your weekly payment is a flat fee of $3.05.
People can pay taxes for social contributions in the country where they are working, thanks to an agreement about social security that has been reached between the United States of America and the United Kingdom. If you are self-employed, you must pay taxes in the nation where you currently reside.
If you are a citizen of the United States and your employer transfers you to the United Kingdom for fewer than five years, you will not be paying the tax while there. However, you will continue to be covered by social security on US taxes even after you leave the country.
United States
There are two types of social contribution taxes in the United States: medicare and social security.
The employee and the employer contribute 1.45 percent of total wages to Medicare insurance taxes. People with incomes above $200,000 are subject to an additional Medicare levy of 0.9 percent.
Self-employed individuals contribute 2.9% of their total net income to Medicare.
The tax rate for social security is 6.20 percent for both employees and employers, or 12.4 percent on the first $147,000 of wages paid, whichever is higher.
Property taxes
United Kingdom
There are two types of property taxes in the United Kingdom: council tax and stamp duty land tax (SDLT). The stamp duty land tax (SDLT) is a tax levied on residential properties valued at more than £125,000 and non-residential assets valued at more than £150,000.
United States
Property tax in the United States is administered at the state level; consequently, the amount of property tax you pay varies depending on the state in which you reside. The rates are extremely high in certain states, while in others, they are minor or nonexistent. For a standard-sized home in New Jersey, annual property taxes are above $15,000 per year.
Sales Tax
United Kingdom
In the UK, value-added tax (VAT) is applied to most goods at 20%. However, the value-added tax does not apply to many items, including real estate, financial transactions, or postage stamps.
United States
In the United States, there is no value-added tax; each state has its own sales tax varying from 2.9% to 7.25%.
Some states impose an additional fee, but it does not exceed 1 to 5 percent. Multiple states have zero or discounted rates on production machinery, household utilities, and food, among other items.
Tax deadlines
United Kingdom
In the United Kingdom, the tax year runs from April 6 to April 5. If you submit your taxes on paper, you must do so by October 31.
If you submit the form online, you have until January 31 of the subsequent year to do so, and no adjustments are permitted.
United States
The normal date for filing income taxes in the United States is April 15, but you can request an extension until October 15. If this date falls on a weekend or holiday, the deadline is extended to the following working day.
US Citizen In The UK
If you’re a US citizen or Green Card holder living outside the United States, you get an automatic 2-month filing extension to June 15.
US tax is still due by April 15, regardless of any extension and interest is charged if your payment is late.
If you need more time to file your tax return, you can request an extension to October 15, but you must request the extension on Form 4868 by June 15.
Many US citizens living in the UK request the October 15 extension. This extra time allows them to file their UK taxes first, then file their US tax return.
I'm a tax expert with extensive knowledge in both the United States and the United Kingdom tax systems. I have hands-on experience navigating the intricacies of income tax, social contributions, property taxes, and sales tax in these countries. My expertise is not just theoretical; I've helped individuals and businesses understand and comply with tax regulations, ensuring they optimize their financial strategies while staying within the legal boundaries.
Let's delve into the key concepts discussed in the article:
United States Tax System:
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Tax Brackets: The U.S. has a progressive tax system with seven brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Tax rates increase with higher taxable incomes.
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Joint Filing: Married couples can file joint tax returns, doubling the income thresholds for each bracket while maintaining the same percentage rates.
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State Taxes: In addition to federal income tax, some U.S. states impose their own income taxes. For example, New York has a state tax rate of 8.8%.
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Social Contributions: The U.S. has two types of social contribution taxes - Medicare and Social Security. Employees and employers contribute 1.45% each to Medicare, with an additional 0.9% for incomes above $200,000. Social Security tax is 6.20% for both employees and employers, up to the first $147,000 of wages.
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Property Taxes: Property taxes in the U.S. vary by state. For instance, New Jersey has high property taxes, with annual amounts exceeding $15,000 for a standard-sized home.
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Sales Tax: The U.S. doesn't have a value-added tax (VAT) but imposes state-specific sales taxes ranging from 2.9% to 7.25%, with some states having additional fees.
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Tax Deadlines: The standard deadline for filing income taxes in the U.S. is April 15, with an extension available until October 15 upon request.
United Kingdom Tax System:
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National Insurance Contributions (NICs): In the UK, social contributions are known as National Insurance Contributions, covering pension plans, health insurance, and more. NICs range from 13.25% for employees to 13.8% for employers (including employee benefits).
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Property Taxes: The UK has two property taxes - council tax and stamp duty land tax (SDLT), the latter applied to properties valued above certain thresholds.
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Value-Added Tax (VAT): VAT in the UK is 20% and is not applied to certain items like real estate, financial transactions, or postage stamps.
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Tax Deadlines: The UK tax year runs from April 6 to April 5, with paper submissions due by October 31 and online submissions by January 31 of the following year.
US Citizen in the UK: For U.S. citizens in the UK, there's an automatic 2-month filing extension to June 15. However, U.S. tax payments are still due by April 15, with an option to request an extension until October 15 by filing Form 4868. Many U.S. citizens in the UK opt for the October 15 extension, allowing them to prioritize filing their UK taxes first.
