A Brief Guide to the Terms Used in Tax Law

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The history of tax is very ancient in nature, dating back to the times when the children of Israel were serving as slaves under Egyptian domination. Coming to the contemporary scenario, when the general rule applies, tax could be deemed as the source that is best exploited by the government.

Needless to mention, it is imposed on earning individuals as well as organisations, the collections of these tax funds being used to finance the services that the State is expected and obligated to offer. Other than that, tax collections are also used for the projects in which the State is supposed to meet some targets and goals. There are two major categories of tax, namely progressive taxes and regressive taxes. When it comes to progressive taxes, the tax rate shares a direct relationship with the figure of the income.

In other words, the higher the income bracket is, the higher would be the tax rate. As for regressive tax, it has a fixed rate and does not take into consideration the amount of income. Sales tax is a very appropriate example of regressive tax. If one considers from a fair standpoint, the poor have to contribute a huger proportion of his /her income as compared to what the rich are paying.

Then there are non-cash benefits that are generally granted to employees by companies that they are working for. Being previously referred to as fringe benefits, these benefits in kind are definitely taxable. The rules are different for an employee if he/she earns less than a certain fixed amount per annum.

Capital Gains Tax, also known as CGT, is imposed on those assets whose value has increased, for example, property or share, whose prices fluctuate over the duration of ownership. When there is an increase in prices and values of assets, the Capital Gains Tax is imposed on the individual who owns the particular asset (property, shares or any other).

An individual pays this Capital Gains Tax when he/she is planning to sell the asset or give it away to someone else. In addition to that, there is a Gift Aid, which is a regular or a one-off amount from taxed income, granted to charities. The charity can claim the tax back.

As for HM Revenue and Customs (also known as HMRC), it is the government department that handles the responsibility of the evaluation as well as collection of most types of taxes, which also includes VAT or Value Added Tax. Other than that, HMRC also pays tax credits and child benefit.

Then of course, there is income tax, which is self-explanatory. This tax is levied on income from employment, property, savings and investments, pension, social security and self-employment income. Overall, the list of tax terms is very diverse in nature, nevertheless, this was a summary of the core and basic concepts that are used in tax law.

Source by Simon P Jennings

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