Your Complete Guide to USA VS UK income Tax

Are you new to the world of income tax? Are you aware of how the tax system works? If no, we are here to help you out. Whether you are a citizen of the UK or the USA, you have to pay tax on your salary. But often, the gruesome manual tax calculations leave you all confused as to how to calculate the net income after all the tax deductions. But, know with the UK Income Tax Calculator, calculating income tax will become easier than ever. The online tool requires only your gross salary, tax year to compute how much tax you have to pay. But, before using the tax tool, you must be aware of HOW the tax system works. If you dream of working in the USA or are a citizen of the UK, you must have complete knowledge of how the tax system works in both countries. To make life easy for the taxpayers, we have created this guide on how to compute taxes in the USA and UK.

Income tax in the USA and UK: As a US citizen or even a green card holder, you will have to pay tax on your worldwide income. Even if you are not living in the USA, you are liable to pay income tax. On the other hand, if you are a citizen of the UK, you only have to pay income on the earing in the UK, i.e. (rental income from a property in the UK). The tax rule in the UK is a little more stringent. For instance, if you are living in the UK even for a month, you will be a tax resident if you have a house there, family, or work for a local office.

How Does the PAYE System Work in the UK and the USA? 

As a citizen of the UK, if you work for a local firm, you can get freedom from manually computing taxes. This is because employees in the UK come under the PAYE system, where their tax is deducted at source. This means the employer will be responsible for computing income after tax for the employees. The process is similar to the withholdings in the US, except in the USA, it's the tax officials give the tax code to the employer so that employees don't have to go through the gruesome process of manually filling taxes.

Tax allowances in the USA and UK: There are no tax allowances in the UK for dependents, such as children or parents in the old age. Whereas in the US each, for every child you have, your taxable income will be reduced by about $4,000.

Now, as you are aware of how tax works in the USA and UK, it's time to start using the Income Tax Calculator to compute taxes.