Edinburgh

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Taxes

Overview of the UK tax system, including council tax and other local taxes residents may encounter.

Sections

a. Who Pays Income Tax?

  • Residents: If you live in Edinburgh and earn income (from employment, self-employment, pensions, or investments), you are subject to Scottish income tax rates.
  • Non-Residents: You may still pay UK income tax on income earned in the UK (e.g., rental income, UK-based employment).
  • Thresholds and Rates: Scotland has its own income tax bands, which differ from the rest of the UK.

b. Scottish Income Tax Rates (2023/24)

| Band Name | Income Range (ยฃ) | Tax Rate (%) | |---------------------|--------------------------|--------------| | Starter Rate | 12,571 - 14,732 | 19% | | Basic Rate | 14,733 - 25,688 | 20% | | Intermediate Rate | 25,689 - 43,662 | 21% | | Higher Rate | 43,663 - 125,140 | 42% | | Top Rate | Over 125,140 | 47% |

  • The Personal Allowance (tax-free income) is ยฃ12,570 for most people, but it tapers off for those earning over ยฃ100,000.

c. How to Pay Income Tax

  • Employees: Tax is deducted automatically through the Pay As You Earn (PAYE) system by your employer.
  • Self-Employed: You must register with HMRC and file a Self-Assessment Tax Return annually.
  • Deadlines:
    • Register for Self-Assessment: By 5th October after the end of the tax year.
    • Online Tax Return Submission: 31st January following the tax year.
    • Payment Deadline: 31st January (and 31st July for advance payments).

3. Council Tax

a. What is Council Tax?

Council Tax is a local tax collected by the City of Edinburgh Council to fund local services like waste collection, schools, and public transport.

b. How is it Calculated?

  • Based on the value of your property (as of 1991 valuations) and the Council Tax Band assigned to it.
  • Edinburgh Council Tax Bands (2023/24):
    • Band A: Up to ยฃ27,000
    • Band B: ยฃ27,001 - ยฃ35,000
    • Band C: ยฃ35,001 - ยฃ45,000
    • Band D: ยฃ45,001 - ยฃ58,000
    • Band E: ยฃ58,001 - ยฃ80,000
    • Band F: ยฃ80,001 - ยฃ106,000
    • Band G: ยฃ106,001 - ยฃ212,000
    • Band H: Over ยฃ212,000

c. Discounts and Exemptions

  • Single Occupancy Discount: 25% off if you live alone.
  • Exemptions: Students, certain disabled individuals, and vacant properties may qualify for exemptions or reductions.

d. How to Pay

  • Payments can be made monthly, quarterly, or annually via direct debit, online, or at local council offices.
  • Contact the City of Edinburgh Council for assistance: Edinburgh Council Tax Portal.

4. Value Added Tax (VAT)

a. What is VAT?

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

b. VAT 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, books, childrenโ€™s clothing).

c. Who Pays VAT?

  • Consumers pay VAT on purchases.
  • Businesses with a turnover above ยฃ85,000 must register for VAT and charge it on their goods/services.

d. How to Pay VAT

  • Businesses file VAT returns quarterly via HMRCโ€™s Making Tax Digital (MTD) system.

5. National Insurance Contributions (NICs)

a. What is NIC?

NICs fund state benefits like pensions and healthcare. Both employees and employers contribute.

b. NIC Rates (2023/24)

  • 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.
    • Class 4: 9% on profits between ยฃ12,570 and ยฃ50,270, and 2% above ยฃ50,270.

c. How to Pay

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

6. Capital Gains Tax (CGT)

a. What is CGT?

CGT is charged on profits from selling assets like property, shares, or businesses.

b. Rates

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

c. Exemptions

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

7. Land and Buildings Transaction Tax (LBTT)

a. What is LBTT?

In Scotland, LBTT replaces Stamp Duty and applies to property purchases.

b. LBTT Rates (2023/24)

| Price Range (ยฃ) | Rate (%) | |------------------------|----------| | Up to 145,000 | 0% | | 145,001 - 250,000 | 2% | | 250,001 - 325,000 | 5% | | 325,001 - 750,000 | 10% | | Over 750,000 | 12% |

  • First-Time Buyers Relief: No LBTT on the first ยฃ175,000.

8. Business Taxes

a. Corporation Tax

  • Paid by limited companies on profits.
  • Rate: 25% (2023/24) for profits over ยฃ250,000. A lower rate of 19% applies to profits under ยฃ50,000.

b. Business Rates

  • Local tax on non-residential properties.
  • Calculated based on the propertyโ€™s rateable value.

9. Tax Considerations for Non-Residents

  • Non-residents are taxed only on UK-sourced income.
  • Double Taxation Agreements (DTAs) may reduce tax liability for individuals from certain countries.

10. Resources and Assistance

a. HMRC

  • Website: www.gov.uk/hmrc
  • Phone: 0300 200 3300 (Income Tax) / 0300 200 3500 (Self-Assessment).

b. City of Edinburgh Council

c. Local Tax Advisors

  • Seek professional advice for complex tax situations. Look for accountants accredited by ICAS (Institute of Chartered Accountants of Scotland).

This guide provides a detailed overview of taxes in Edinburgh. For personalized advice, consult HMRC, the City of Edinburgh Council, or a qualified tax advisor.