Sheffield

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Taxes

Overview of local and national tax systems that immigrants and visitors may need to understand.

Sections

What is it?

Income Tax is a national tax on earnings from employment, self-employment, pensions, savings, and investments.

How is it calculated?

Income Tax is calculated based on your annual income and is divided into tax bands:

  • Personal Allowance: ยฃ12,570 (tax-free income for most people)
  • 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

Payment Procedures

  • Employees: Income Tax is deducted automatically through the Pay As You Earn (PAYE) system by your employer.
  • Self-Employed: You must register with HM Revenue & Customs (HMRC) and file a Self-Assessment tax return annually. Payments are made directly to HMRC.

Deadlines

  • Self-Assessment Tax Return:
    • Online submission: 31 January (following the end of the tax year)
    • Paper submission: 31 October (following the end of the tax year)
  • Payment Deadlines: 31 January (for the previous tax year) and 31 July (for advance payments).

3. National Insurance Contributions (NICs)

What is it?

NICs are contributions to the UKโ€™s social security system, funding benefits like the NHS, pensions, and unemployment support.

How is it calculated?

NICs depend on your employment status and income:

  • Employees: Class 1 NICs are deducted via PAYE.
    • 12% on earnings between ยฃ12,570 and ยฃ50,270
    • 2% on earnings above ยฃ50,270
  • Self-Employed: Class 2 and Class 4 NICs are paid through Self-Assessment.

Payment Procedures

  • Employees: Automatically deducted by employers.
  • Self-Employed: Paid directly to HMRC via Self-Assessment.

4. Value Added Tax (VAT)

What is it?

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

Rates

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

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.

Payment Procedures

Businesses file VAT returns quarterly and pay directly to HMRC.

5. Council Tax

What is it?

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

How is it calculated?

Council Tax is based on the value of your property (as of 1991 valuations) and the number of adults living there. Properties are assigned to one of eight bands (A to H):

  • Band A: Up to ยฃ40,000
  • Band H: Over ยฃ320,000

In Sheffield, the average annual Council Tax for Band D properties is approximately ยฃ2,000 (2023 rates). Discounts and exemptions may apply:

  • Single Person Discount: 25% off if you live alone.
  • Students: Full exemption if all residents are full-time students.
  • Low-Income Households: May qualify for Council Tax Reduction.

Payment Procedures

  • Paid directly to Sheffield City Council.
  • Payment options: Monthly (10 or 12 installments), quarterly, or annually.
  • Payment methods: Direct Debit, online, by phone, or at a bank/post office.

Deadlines

  • Payments are typically due on the 1st of each month unless otherwise arranged.

6. Stamp Duty Land Tax (SDLT)

What is it?

SDLT is a tax on property purchases in England.

Rates

  • No tax on properties under ยฃ250,000.
  • 5% on the portion between ยฃ250,001 and ยฃ925,000.
  • Higher rates apply for additional properties (e.g., buy-to-let).

Payment Procedures

Your solicitor or conveyancer usually handles SDLT payments during the property purchase process.

Deadlines

Must be paid within 14 days of completing the property purchase.

7. Business Rates

What is it?

Business Rates are a local tax on non-residential properties, such as shops, offices, and warehouses.

How is it calculated?

Rates are based on the propertyโ€™s "rateable value" (determined by the Valuation Office Agency) and a multiplier set by the government.

Payment Procedures

  • Paid directly to Sheffield City Council.
  • Payment options: Monthly or annually.

8. Other Taxes

  • Capital Gains Tax: Tax on profits from selling assets like property or shares.
  • Inheritance Tax: Tax on estates valued over ยฃ325,000.
  • Car Tax (Vehicle Excise Duty): Annual tax for vehicle owners, based on emissions and vehicle type.

9. Local Considerations in Sheffield

  • Student Population: Sheffield has a large student population due to its universities. Full-time students are exempt from Council Tax, but you must apply for the exemption.
  • Low-Income Support: Sheffield City Council offers Council Tax Reduction schemes for low-income households.
  • Local Resources:
    • Sheffield City Council Website: www.sheffield.gov.uk โ€“ for Council Tax and Business Rates.
    • HMRC Website: www.gov.uk โ€“ for national taxes and Self-Assessment.
    • Citizens Advice Sheffield: Offers free advice on tax and financial matters.

10. Practical Tips for Newcomers

  • National Insurance Number: If youโ€™re new to the UK, apply for a National Insurance Number to work and pay taxes.
  • Register with HMRC: If self-employed, register with HMRC as soon as possible.
  • Set Up Direct Debits: For Council Tax and utility bills, setting up direct debits ensures timely payments.
  • Keep Records: Maintain records of income, expenses, and tax payments for at least 5 years.

By understanding these taxes and their procedures, you can effectively manage your finances while living in Sheffield. If you need further assistance, consider consulting a tax advisor or contacting HMRC directly.