Planning Personal Finance

Planning Personal Finance

Introduction

Income tax persists as the tax imposed on a person as well as the entity which vary based on the profits generated or amount of the income. The history of the income tax in Great Britain dates back to 1798 introduced by then Prime Minister William Pitt the Younger. Moreover, the same tax was introduced in Brazil in 1924. Notably, in Scotland, income tax exists as the individual income tax through different employment and controlled by the Scottish parliament. However, HM Revenue & Customs that occurs as the UK government agency conducts the collection of the income tax. Most of the countries over the years collect taxes but lack the adequate structure of the entire population.  The United Kingdom and Scotland share most of the income tax policies, regulations and rates despite some differences. Similarly, the Scottish proposal of the 2018-20119 budgets would result in some significant differences in the income tax structure with the UK system. Such variations would arise and comprise factors such the types of taxpayers, rates and bands as well as its operations. Equally, Brazil income tax varies due to diverse factors of consideration like income and type of resident. As a result, Brazil possesses some dissimilarities and similarities in terms of income tax imposed on individuals and entities.

Anywhere in the world, people get liable to pay taxes to have a structured country, with security and well-structured public health. For many years, people pay taxes without having the results or structure for the entire population (Sandford, 2018)). Some countries like the UK as witnessed from reports possess limited differences for people at the upper and lower class, but countries like Brazil (Eden, 2016). For example, we can see a lot of difference mainly in public transport and the area of ​​public health. The paper explains how taxes in the UK and Scotland have changed between 2019 and 2020 and the reasons the government took to change the contribution of taxes as well as looking at the benefits and implications that this can bring to the country. According to Sandford (2018), the main question focuses on the reason why the government decided to change the tax difference and intended benefits for the population with this change. Furthermore, the paper would explain about the tax system in the country of Brazil and why a country like that with a large population has not had the infrastructure in terms of both health and safety and why it has a certain inequality across the country.

Nowadays, many countries exist as the best in terms of growth, but sometimes they forget to create an equal population-based on the taxation system. Income and wealth inequality matters in Scotland and the UK, tax exist as the required fee charged on individuals and organizations by government, although some people complaining of making tax contributions to government, these contributions persist as essential for the economy of a country (Sandford, 2018). Generally, governments collect taxes, the tax is a “financial fee” or deduction for something you receive or own as well as a cost added to something you buy.

The income tax was the first practiced in British based on history that involved direct collection on people’s earnings. It was brought in 1799 by Prime Minister William Pitt the Younger, officially declared an income tax in 1816 but increased effectively in the early 20th century. According to Eden (2016), the UK has many taxes, some are known as “direct” taxes levied on the person’s income who pays them, rather than on goods and services. In order to clarify who exist as responsible for collecting taxes from the population, HMRC exists as the UK tax authority, they are responsible for collecting and managing most UK and Scottish income tax. The government came to power in 2010, the key purpose was to cut government borrowing (UK Government, 2020). Therefore, changes been happening, such as the introduction of universal credit, total benefit and a cap on total welfare spending. As a result, the governments have reported a big increase in the numbers of people falling into poverty, also including that in employment.

UK and Scotland Income Tax Similarities

The system of income tax payment among the residents of the UK and Scotland share various similarities. The residential issues play a significant role in determining individuals that pay the tax to the Scottish and UK governments (UK Government, 2020). All the residents of Scotland and the UK pay the income tax. Similarly, individuals would pay the tax if they move out or in of both UK and Scotland. Furthermore, permanent residents of both countries like homeowners and frequently reside within Scotland, and the UK would pay the tax in different ways.  On the same note, the employed individuals in both countries would get deducted for the tax by the employer as required by the two governments (Scottish Government, 2020). Moreover, Scotland and the United Kingdom possess different rates and bands but maintain the system of ascending income tax as per the pension receives or individual income. For example, the lower earners would tax less as compared to the higher earners. Nevertheless, the collection of the income tax remains the duty and responsibility of the HMRC, which pays to the Scottish government through the HM treasury (Scottish Government, 2020). However, the government of Scotland and the UK share the perspectives and things that get taxed such as money from employment, income from trusts, job benefits, self-employment earnings, and interest on the savings (Nguyen, Onnis & Rossi, 2017). Both governments further tax types of pension such as retirement annuities as well as persona, company and government pensions. A most significant way of collecting the income tax in the UK and Scotland exist as Pay As You Earn (PAYE).

UK and Scotland Income Tax Differences

After the passage of the Scottish Act 2012, Scotland gained power over the income tax hence establishing the Scottish Rate of Income Tax (SRIT). Furthermore, the Scotland Act 2016 offered Scotland full control of the income tax rates as well as bands but excluded the personal allowance for UK control.  The partial devolved Scottish income tax would significantly bring variations in the systems between Scotland and the United Kingdom. The changes would affect the non-dividend and non-savings of the Scottish taxpayers as compared to the UK ones (Eden, 2016). Scottish parliament formulated the five-band income tax system possessing crucial various from that of the United Kingdom. Similarly, the Scotland rates of the income vary as compared to the rest of the UK (Nguyen, Onnis & Rossi, 2017). The table below explains the differences in rates among the different bands.

Based on the rates in different bands, the rates exist as higher in Scotland as compared to the rest of the United Kingdom.  Furthermore, people living in Scotland pay less of the income as compared to people who reside in the rest of the United Kingdom. For instance, UK taxes the people living in Scotland 46% more like those living in the UK at 45% (Ghodsi & Webster, 2017).

However, the Scottish Parliament has the power to set a different rate of income tax in Scotland, Known as the (SRIT). According to Scottish rates and bands for 2020 to 2021 originates from an assumption that the personal allowance will be frozen at 12,500 by the UK government, at the UK Budget on 11 March 2020. According to the Scottish government on 6 February 2020 the income tax rates and bands will give effect to the income tax policy bands for example who is starting to earn around 12,501 to 14,585 (starter rate) will be charged 19% in contrast which is earning from 43,431 to 150,000 higher rate will be charged 41%, above 150,000 considering top rate will be charged 46% (UK Government, 2020). For some Scottish people who earning exceeds above the personal allowance will be unaffected by these changes but according to 31% of Scots, particularly those earning from 11,850 and 26,00 will pay less income tax in Scotland comparing to the rest of the UK (Eden, 2016). The Scottish government believes that replaced the three-band system and reduces the tax on low earners but increases it for higher earners (Ghodsi & Webster, 2017). In contrast, the UK government income tax rates and bands differ from Scotland. For example, the tax rates who earns of 12,500 you do not have to pay tax on, but if earning up to 12,500 to 50,000 will be tax rate 20% on the total, not just the extra that have earned if someone is higher rate from 50,000 to 150,000 the tax rate will be 40% (UK Government, 2020).

Brazil Income Tax

Brazilian individuals that experiences taxation exists as subject to the federal income tax laws. As per the current laws, the people the federal income tax rates for people persist in a progressive manner hence ranging from 7.5% to 27.5% for those eligible of taxation (Rodriguez, 2018). Moreover, the tax rate level related to the maximum and minimum exists in a dynamic nature, thus changing annually. The tax year occurs as the calendar year as well as income tax year hence filing conducted by 30 April, which mark the ending of the tax financial year (Rodriguez, 2018). Notably, the filing income returns occurs through an electronic method to the Brazilian IRS. However, income taxation in Brazilian considers some of the critical factors like the type of income as well as residence.

Residents

Income tax experienced by the Brazilians varies depending on the tax residence status. For example, foreigners considered as the tax resident by the federal authority would get treated as Brazilian resident taxpayers (Rodriguez, 2018). On the other hand, a foreign person who never triggered the process of tax residency remains non-resident taxpayers as stipulated by the federal laws.  The Brazilian residents get taxed on the basis of cash and worldwide annually, whether or not the personal income gets remitted to Brazil (Rodriguez, 2018). Such laws contrast the non-residents since they only get taxed form the sources located in Brazil. The Brazilians not only pay taxes but also prepare and submit the tax returns, present the asset returns to the Brazilian central bank and payment of the income tax in advance (Rodriguez, 2018).  The resident taxpayers include permanent and naturalized residents, individuals possessing temporary or permanent visa for working contracts as well as those with visa without the contracts after staying for 182 days.

Taxable Income

The taxable income comprises wages commissions, salaries, premiums, bonuses and dividends, to name a few. As per Rodriguez (2018), it further includes most of the interest and allowances related to employment such as education housing and vacation leave. Brazilian citizens persist as subject to the withholding tax as per the remuneration paid or and earned from the domestic sources. However, different withholding rates apply to the income received by the taxpayers in association with the Profit Participation Plan (Rodriguez, 2018). Furthermore, federal conduct a collection of the monthly income tax based on domestic and worldwide structure.

Nowadays, many countries exist as the best in terms of growth, but sometimes they forget to create an equal population-based on the taxation system. Equityoriginatesfrom the idea of moral equality, that people should be treated as equals while taxing. Income and wealth inequality matters in Scotland and the UK, tax exist as the required fee charged on individuals and organizations by government, although some people complaining of making tax contributions to government, these contributions persist as essential for the economy of a country. Generally, governments collect taxes, the tax is a “financial fee” or deduction for something you receive or own.

Healthcare and health insurance exist as the best in the United Kingdom for the generation. The National Health Services offers health insurance without considering other privates insurance services. Moreover, some of the insurance firms such as Vitality, Bupa, AXA PPP, Aviva, to name a few plays a significant role in offering health cover for the young and old generations as affordable interest.

References

Ghodsi, Z., & Webster, A. (2017). Forecasting UK Income Tax (No. BAFES07). Department of Accounting, Finance & Economics, Bournemouth University.

Nguyen, A. D., Onnis, L., & Rossi, R. (2017). A Narrative Account of Income and Consumption Tax Changes in the United Kingdom 1973-2009. Technical appendix, University of Manchester.

Sandford, C. T. (2018). Taxing Personal Wealth: An Analysis of Capital Taxation in the United Kingdom—History, Present Structure and Future Possibilities. Routledge.

Webley, P., Adams, C., & Elffers, H. (2019). VAT compliance in the United Kingdom. Centre for Tax System Integrity (CTSI), Research School of Social Sciences, The Australian National University.

Scottish Government. (2020). Scottish Income Tax: 2020-2021 – gov.scot. Retrieved 25 February 2020, from https://www.gov.scot/publications/scottish-income-tax-2020-2021/

UK Government. (2020). Income Tax in Scotland. Retrieved 25 February 2020, from https://www.gov.uk/scottish-income-tax/who-pays

Rodriguez, D. (2018). Income tax in Brazil: past, present, and future – The Brazilian Report. Retrieved 25 February 2020, from https://brazilian.report/business/2018/10/18/income-tax-brazil-future/

Eiser, D. (2017). What might slower economic growth in Scotland mean for Scotland’s income tax revenues?. Fraser of Allander Economic Commentary, 41(4), 35-45.

Eden, S. (2016). Scotland Act 2016: Further Tax Powers Come North. Edinburgh Law Review, 20(3), 376-382.