Scottish Tax Payer Notification December

Scottish Tax Payer Notification December.

Many people south of the border will not be aware but as part of the devolution process for Scotland, a new Scottish rate of income tax will apply in Scotland from April 2016.

In short, what this means is that people who are considered as a "Scottish taxpayer" may pay totally different rates of income tax compared to the rest of the UK. It is the Scottish parliament that have the power to do this now and fundamentally puts Scotland in charge of much of its own revenue and therefore expenditure.

HMRC has confirmed that letters will be issued in December to people considered to be Scottish taxpayers and the rate of Scottish income tax will be announced in January 2016.

Who will be a Scottish Taxpayer?

If you fall into one of the following three categories you will be considered a Scottish taxpayer and therefore your income tax will be set based upon these new rates rather than the general rates of income tax for the rest of the United Kingdom:

1. You are a Scottish Parliamentarian
2. You have a close connection with Scotland e.g. you live in Scotland or even if you own two properties, if your main residence is in Scotland
3. You spend as many or more days in Scotland than any other part of the UK

How much is the Scottish rate of income tax?

This is unknown today. Many commentators are speculating that the Scottish rates of income tax could be 2% higher than the rest of the UK. Clearly, this will be used to fund any additional expenditure that the Scottish government wishes to make.

What happens to my pension tax relief?

HMRC has confirmed that basic rate pension tax relief at source will still be given at 20% for all pensions across the UK whether you are resident in Scotland or another part of the UK. If your pension scheme is a company pension scheme where your own pension contributions are deducted before income tax is applied (net pay arrangement) there may be some changes in the amount that you pay depending upon what the Scottish rate of income tax actually is. HMRC expects all employers to notify their staff of any changes.

Comment

Yet another layer of financial complexity for already one of the most complex finance and taxation systems in the world. Happy days!