Cardiff

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Taxes

Information on local and national tax systems, including council tax and income tax for residents.

Sections

A. Income Tax

Income tax is a national tax on earnings from employment, self-employment, pensions, and other sources of income.

Rates and Bands (2023/24 Tax Year)

  • Personal Allowance: ยฃ12,570 (tax-free income)
  • Basic Rate: 20% on income between ยฃ12,571 and ยฃ50,270
  • Higher Rate: 40% on income between ยฃ50,271 and ยฃ125,140
  • Additional Rate: 45% on income above ยฃ125,140

Welsh Rates of Income Tax

In Wales, the Welsh Government has the power to set a portion of the income tax rate. However, for the 2023/24 tax year, the rates are the same as in England.

How Itโ€™s Calculated

  • Employers deduct income tax directly from your salary through the Pay As You Earn (PAYE) system.
  • Self-employed individuals must file a Self Assessment Tax Return annually to calculate and pay their income tax.

Deadlines

  • PAYE: Automatically deducted monthly.
  • Self Assessment:
    • Register by 5 October after the end of the tax year.
    • File online by 31 January (or 31 October for paper returns).
    • Pay any tax owed by 31 January.

How to Pay

  • PAYE: Automatically deducted.
  • Self Assessment: Pay online via HMRCโ€™s website, by bank transfer, or through direct debit.

B. National Insurance Contributions (NICs)

NICs fund state benefits like the NHS and pensions. They are separate from income tax but are also deducted from earnings.

Rates (2023/24 Tax Year)

  • Class 1 (Employees):
    • 12% on earnings between ยฃ12,570 and ยฃ50,270.
    • 2% on earnings above ยฃ50,270.
  • Class 2 and 4 (Self-Employed):
    • Class 2: ยฃ3.45 per week if profits exceed ยฃ12,570.
    • Class 4: 9% on profits between ยฃ12,570 and ยฃ50,270, and 2% above ยฃ50,270.

How to Pay

  • Employees: Deducted via PAYE.
  • Self-Employed: Paid through Self Assessment.

C. Council Tax

Council tax is a local tax used to fund services like waste collection, schools, and public infrastructure. It is specific to your property and location.

Rates in Cardiff

Council tax rates depend on the valuation band of your property (A to I). For 2023/24, annual rates in Cardiff range approximately as follows:

  • Band A: ยฃ1,100
  • Band D (average): ยฃ1,650
  • Band I: ยฃ3,300

How Itโ€™s Calculated

  • Based on the propertyโ€™s value as of 1 April 1991.
  • Discounts may apply (e.g., single-person households get a 25% discount).

How to Pay

  • Paid directly to Cardiff Council in monthly installments (10 or 12 months).
  • Payment methods: Direct debit, online, by phone, or at a local post office.

Deadlines

  • Payments are typically due on the 1st of each month, but you can arrange a different schedule with Cardiff Council.

Local Considerations

  • Cardiff Council offers Council Tax Reduction for low-income households. Apply online via the Cardiff Council website.

D. Value Added Tax (VAT)

VAT is a consumption tax applied to most goods and services in the UK.

Rates

  • Standard Rate: 20% (most goods and services)
  • Reduced Rate: 5% (e.g., energy bills, childrenโ€™s car seats)
  • Zero Rate: 0% (e.g., most food, childrenโ€™s clothing)

How Itโ€™s Paid

  • Businesses collect VAT from customers and pay it to HMRC.
  • Consumers pay VAT as part of the purchase price.

Local Considerations

  • Cardiff has a thriving retail and hospitality sector, so VAT is included in most purchases. Always check receipts to see if VAT is included.

E. Capital Gains Tax (CGT)

CGT applies to profits from selling assets like property (not your main home) or investments.

Rates

  • Basic Rate Taxpayers: 10% (18% for property)
  • Higher/Additional Rate Taxpayers: 20% (28% for property)

Exemptions

  • Annual tax-free allowance: ยฃ6,000 (2023/24).

How to Pay

  • Report and pay via HMRCโ€™s online system.

F. Other Taxes

  • Stamp Duty Land Tax (SDLT): Paid when buying property. In Wales, this is replaced by the Land Transaction Tax (LTT).
  • Inheritance Tax (IHT): Paid on estates over ยฃ325,000 at 40%.

3. Tax Resources and Assistance in Cardiff

A. HMRC Services

  • Online: Most tax-related tasks can be managed via the HMRC website (www.gov.uk/hmrc).
  • Phone: HMRC helpline: 0300 200 3300.
  • Self Assessment Helpline: 0300 200 3310.

B. Cardiff Council

For council tax inquiries:

  • Website: www.cardiff.gov.uk
  • Phone: 029 2087 2087
  • Address: Cardiff Council, County Hall, Atlantic Wharf, Cardiff, CF10 4UW.

C. Local Tax Advisors

If you need professional help, Cardiff has many accountants and tax advisors. Look for firms accredited by the Chartered Institute of Taxation (CIOT) or the Association of Chartered Certified Accountants (ACCA).

D. Citizens Advice Cardiff

Provides free advice on tax and financial matters.

4. Tips for Managing Taxes in Cardiff

  1. Register Early: If self-employed, register with HMRC as soon as possible.
  2. Keep Records: Maintain detailed records of income, expenses, and receipts.
  3. Set Up Direct Debit: For council tax and Self Assessment payments, direct debit ensures you never miss a deadline.
  4. Check for Discounts: Explore council tax reductions or exemptions if eligible.
  5. Use Online Tools: HMRCโ€™s online portal is user-friendly and efficient for managing taxes.

By understanding the tax system and using the resources available in Cardiff, you can ensure compliance and avoid unnecessary penalties. Let me know if you need further clarification or assistance!