That’s Scotch Tax! 2


Scottish Tax

On the 15th September HMRC issued the following announcement…

Depending on the level the Scottish Parliament sets the rate at Scottish taxpayers may pay a different rate of Income Tax to the rest of the UK.

Some of the Income Tax collected under the Scottish rate will fund the Scottish government and the rest will fund the UK government.

The Scottish rate of Income Tax doesn’t apply to income from savings such as building society interest or income from dividends. This rate will stay the same for all taxpayers across the UK.

The Scottish government is expected to announce the proposed Scottish rate of Income Tax for the tax year 2016 to 2017 in its autumn 2015 draft budget.

HM Revenue and Customs (HMRC) will collect the Scottish rate of Income Tax on behalf of the Scottish government.

Identifying Scottish taxpayers

It’s where you live, not where you work, that decides whether you’re a Scottish taxpayer.

You’ll pay the Scottish rate of Income Tax if:

  • you’re resident in the UK for tax purposes, and
  • your main residence for most of the tax year has a Scottish postcode

HMRC will contact potential Scottish taxpayers before April 2016. If the address HMRC holds for you is in Scotland you’ll be classed as a Scottish taxpayer. It’s your responsibility (not your employers’) to notify HMRC if you change your address.

Your April 2016 tax code will begin with the letter ‘S’ to show you’re a Scottish taxpayer.

If you pay your Income Tax through your wages (known as Pay As You Earn) HMRC will advise your employer to treat you as a Scottish taxpayer so you don’t need to do anything.

The Scotland Act 2012 contains the full definition of a Scottish taxpayer but where residency is not straightforward these examples of ‘close connection’ will help you.

National Insurance contributions are unaffected by the introduction of the Scottish rate of Income Tax.

Scottish Rate of Income Tax Calculator – click here

According to the Telegraph in August

Nicola Sturgeons’ rhetoric suggests she is planning to revive Labour’s ailing fortunes in Scotland, where it was all but wiped out in the general election, by veering Left and attempting to regain the party’s traditional working class support.

Among the policies she said she supported were a 50p top rate of income tax for people earning more than £150,000 and removing independent schools’ charitable status.

But the Tories said her blueprint would “send Scotland back to the 1970s” and warned it would merely result in an exodus of “wealth creators” south of the Border.

It will be interesting to see what the Scottish Parliament does to tax rates and whether or not its a success for Scotland.

steve@bicknells.net

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2 comments

  1. I’ve written a few articles on the implications of the devolution of income and corporation tax to Scotland in The Conversation that you find interesting:

    https://theconversation.com/scottish-income-tax-control-threatens-big-trouble-across-uk-43569

    https://theconversation.com/scottish-income-tax-control-threatens-big-trouble-across-uk-43569

    https://theconversation.com/profiles/grahame-steven-165097/dashboard#

    Technical guidance recently published by HMRC indicates that temporary accommodation – e.g. hotels and holiday homes – would not normally be considered a “place of residence” and provides a number of “close connection” examples:

    https://www.gov.uk/government/publications/scottish-rate-of-income-tax-technical-guidance-on-scottish-taxpayer-status/scottish-rate-of-income-tax-technical-guidance-on-scottish-taxpayer-status

  2. I’ve written a few articles on the implications of the devolution of income and corporation tax to Scotland in The Conversation:

    https://theconversation.com/scottish-income-tax-control-threatens-big-trouble-across-uk-43569

    https://theconversation.com/scottish-income-tax-control-threatens-big-trouble-across-uk-43569

    https://theconversation.com/profiles/grahame-steven-165097/dashboard#

    Technical guidance recently published by HMRC indicates that temporary accommodation – e.g. hotels and holiday homes – would not normally be considered a “place of residence” and provides a number of “close connection” examples:

    https://www.gov.uk/government/publications/scottish-rate-of-income-tax-technical-guidance-on-scottish-taxpayer-status/scottish-rate-of-income-tax-technical-guidance-on-scottish-taxpayer-status

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