10 Sep 2024
Understanding tax obligations might seem complicated when you move from a low-income to a high-paying country. The United Kingdom has always been attractive to the residents of poor countries because of its strong economy. The World Bank reports that the UK's GDP has risen to 2.274 trillion, a strong pull for Bangladeshi expats. According to the Bangladesh High Commission in London, over half a million Bangladeshi nationals live in the UK. They earn money and send money to Bangladesh from the UK to support their families financially.
Countries with developed economies are particularly concerned about taxation. The UK is still catching up, being one of the most developed economies in the world. Before you get your first income, you must have all the necessary knowledge about income tax in the UK. This blog will help you address taxation concerns in the UK.
If you are new to the UK, you might feel overwhelmed by the vast taxation system. The nature of income tax is progressive in the UK. It means that the higher the income, the greater the income tax. Thus, knowing the limits on money transfers when you send money back to your home after getting your income is crucial.
The specific percentage of income that individuals or businesses must pay to the government. The government imposes this to raise funds for public services like education or public projects like roads or residents.
The government of the UK announces the updated tax bands in the annual budget presentation. Here is a demonstration of how much income tax you will have to pay for the tax year 2024. People who earn €12,570 per year are allowed to use their whole income without paying any tax. This is called the Free Allowance. If the earnings are above €12,570 and less than €50,270, a 20% tax is imposed (basic rate). 40% tax is levied on income between €50,271 and €150,000 (higher rate). Income greater than €150,000 faces a 45% tax (additional rate).
Tax Band | Income | Tax Percentage |
Personal Allowance | Up to €12,570 | 0% |
Basic Rate | €12,571 to €50,270 | 20% |
Higher Rate | €50,271 to €150,000 | 40% |
Additional Rate | Above €150,000 | 45% |
These thresholds regularly change with every new budget statement. Many factors, such as employment or inflation, are responsible for the fluctuations. Remember that this is not the tax you pay to send money to Bangladesh from the UK.
Taxable income is calculated by subtracting free allowance money from total income. For instance, your income is €50,000. The income on which tax will be applied => €50,000 - €12,570 = €37,430. The UK government has removed the free allowance money from 2024 to 2028, so it will not be updated until 2028.
You are declared a non-resident if you stay in the UK for less than 183 days in a tax year. Non-residents are not supposed to pay taxes for income not earned in the UK. They only have to pay tax on income earned in the UK. If your stay exceeds 183 days, you are considered a UK resident and must pay income tax on your worldwide income. This point is noted for Bangladesh expats who earn in their home country and the UK.
The UK government offers a huge relief to residents who are not citizens. These migrants have to pay tax only on income brought to the UK. Your earnings will not be taxed if they do not enter the UK's borders. This relief can be beneficial if you send money online to Bangladesh from the UK.
If you are a salaried person, the income tax will automatically be deducted from your salary through an automated system proposed by the UK government. This system is named PAYE (Pay As You Earn). On the other hand, if you are self-employed, own a business or have other earning resources, you will have to pay income tax through self-assessment. In this case, you must also file a Self-Assessment Tax Return every year. The last date to file this tax return is 31st January of every year. If you miss this deadline, you have to face penalties.
Besides the income tax, you must pay additional taxes to make a money transfer to Bangladesh. Although this money transfer tax is meager compared to regular income, this tax becomes considerable when you send more money to your home. Foreign money transfer is complicated and unreliable if you do not choose the right platform to send money online. Thus, you must select the best for yourself. You have the right to make the most of your hard-earned money. Look for the best remittance service provider platform that offers low fees and high exchange rates so your family can earn more money.
If you live more than 183 days in Bangladesh, you must pay tax on your income. But if you gain approval for the “remittance basis,” you must pay income tax on only the income you bring to the UK.
This system is designed to simplify income tax collection from employed persons. It automatically deducts income tax from your salary.
You can avoid double taxation on your income using the Double Taxation Agreement (DTA). You need to file specific forms with HMRC to claim this relief.
If you are self-employed or have additional income resources, use the Self-Assessment system to calculate your income tax. HM Revenue and Customs(HMRC) uses this system to allow eligible persons to report their incomes.
A Tax Return is a formal document that reports all financial activities in the past tax year. This document helps indicate how much income tax self-employed or business owners have to pay. Filing a Tax Return does not apply to salaried or employed persons.
