At Work in Edinburgh


Tax system in Edinburgh


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The government collects tax from your earnings to pay for public services provided. These deductions are usually made automatically by your employer. These include the Personal Income Tax and National Insurance (NI).

Individual Tax

When living and working in Scotland, you will pay Income Tax on what you earn. There are different rates of Income Tax depending on how much you earn in one year. Not all income is taxable and you're only taxed on "taxable income" above a certain level. There are relief's and allowances that can reduce your Income Tax bill.

    Taxable income includes:
  • Earnings from employment
  • Earnings from self-employment
  • Most pensions income (State, company and personal pensions)
  • Interest on most savings
  • Income from shares (dividends)
  • Rental income
  • Income paid from a trust
    Non-taxable income includes:
  • Certain benefits
  • Income from tax exempt accounts
  • Working Tax Credit (WTC)
  • Premium bond wins

Tax-Free Allowances

Most resident of the UK receive a "personal allowance" of taxable income that is tax-free. For 2011-2012 that amount is 7,475 GBP. You may be entitled to a higher Personal Allowance if you're 65 or over. People with disabilities are also eligible for additional allowances.

Deductibles

There are a number of deductible allowances and relief's that can reduce your tax bill. The two most popular are:

  • Married Couple's Allowance - the husband, wife or civil partner has to be born before 6 April 1935
  • Maintenance Payment Relief - either you or your former spouse or civil partner must have been born before 6 April 1935
Unlike tax-free allowances, these actually reduce your tax bill.

Rates

The basic rate for income 0-35,000 GBP:
20 percent

The higher rate for income 35,001 to 150,000:
40 percent

The higher rate for income over 150,000:
50 percent

For more on rates, go to the HM Revenue & Customs Rates page.

Expats

Expats will need to register with the nearest HM Revenue and Customs office. Many countries have reciprocal agreements with the UK to avoid double taxation. To check if your country has an agreement, go to Tax Information Exchange Agreements(TIEAs).

National Insurance

National Insurance is also deducted from your pay by your employer. NI is a tax to help pay for social security benefits such as free health care, sick pay and maternity pay.

    To apply for a National Insurance number, you generally need:
  • Evidence of employment (i.e. employment contract or pay slip)
  • Passport
  • Letter to confirm your new home address

National Insurance Number

A national insurance number is your own personal account number. It is unique to you and you keep the same one all your life. It makes sure that the National Insurance contributions and tax you pay are properly recorded against your name.

People born in the UK are assigned an NI number and receive a plastic number card shortly before their 16th birthday. This must be kept in a safe place.
People from abroad who wish to work in the UK, or those to whom a number was not initially allocated as children, may apply for a card by calling # 0845 915 7006, or by contacting DirectGov.

How to Pay

Income Tax is collected in different ways depending on the type of income and whether you're employed, self-employed or not working.

    The different ways Income Tax is collected include:
  • Pay As You Earn (PAYE): a system of withholding of income tax from payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns. PAYE may also refer to withholding of the employee portion of National Insurance or similar social benefit taxes.
  • Self Assessment: necessary for complicated taxes and self-employed
  • Tax deducted "at source": refers to system in which tax is deducted from bank/building society interest at the basic rate before the interest is paid to you

If you're an employee or you receive a company or private pension, your employer or pension provider will deduct tax through PAYE. HM Revenue & Customs (HMRC) may still ask you to complete a Self Assessment tax return if you have complex tax affairs. If you're self-employed, you'll be responsible for filling in a Self Assessment tax return and paying your own tax.

Refunds

You may end up paying too much into the system if you change jobs often or have more than one job at the same time. If you think you've paid too much tax you can take some simple steps to apply for a refund.

To claim a refund, contact your Tax Office and explain why you think you've paid too much tax. They may already have everything they need to check your claim. If not, they'll tell you what documents to send. You may get a new tax code, so any refund will be included with your wages.

For more information on claiming a refund, go to HM Revenue & Customs Reclaiming Tax page.

VAT

VAT is charged on most goods and services, such as food and entertainment. It is included in the marked price of items. Current VAT is 20 percent.

Certain goods and services are exempt from VAT or may fall outside the scope of the UK VAT system. Items exempt from VAT altogether include: insurance, credit services, education & training and the services of a doctor or dentist. Selling or leasing commercial property is exempt from VAT, though a business can opt to relinquish the exempt status that would allow VAT payable (input tax) to be reclaimed. A reduced rate of 5 percent applies to domestic fuel or power, heating equipment, children's car seats, some contraceptives and sanitary products, certain residential property renovations, and some other items.

Council Tax

Council Tax is a form of local taxation, paid to your local council, for services the council operate such as refuse collection, street lighting, water supply and local amenities.

Rates are set by local councils and vary according to the value of the property in which you live. Scottish rates are lower than the UK average.

Edinburgh City Chambers
High Street
Edinburgh EH1 1YJ
Tel: 0131 200 2000

    Current Council Tax for Edinburgh based on property value:
  • Below 27,000 - 779.33 GBP
  • 27,001 to 35,000 - 909.22 GBP
  • 35,001 to 45,000 - 1,039.11 GBP
  • 45,001 to 58,000 - 1,169.00 GBP
  • 58,001 to 80,000 - 1,428.78 GBP
  • 80,001 to 106,000 - 1,688.56 GBP
  • 106,001 to 212,000 - 1,948.33 GBP
  • above 212,000 - 2,338.00 GBP

To find your Council, use DirectGov's directory.

Stamp duty

Stamp duty is payable whenever you buy a property, except properties in certain designated disadvantaged areas. Rates are based on a percentage of the property value.

    Current Rates based on the value of property:
  • Up to and including 125,000 - 0 percent
  • 125,001 to 250,000 - 1 percent
  • 250,001 to 500,000 - 3 percent
  • Over 500,000 - 4 per cent

Update 8/04/2011



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