Scottish Income Tax Rate Set 2016
Scottish income tax rate will remain the same in Scotland as in England when limited powers are transferred to Holyrood next year.
The Finance Secretary John Swinney made the announcement to the Scottish Parliament as he unveiled his Scottish Budget to MSPs.
Under the 2012 Scotland Act, Holyrood will be handed limited powers over income tax rates for Scotland from 6 April 2016. The Treasury will deduct from the Scottish block grant a sum equivalent to the product of 10p worth of income tax for those deemed to be Scottish taxpayers.
The Scottish Parliament has the power to set the Scottish Rate of Income Tax (SRIT).
John Swinney has announced the SRIT will be set at 10p in the pound, so income tax will remain unchanged for Scottish taxpayers.
The Finance Secretary said: “I hope that from 2017/18 this parliament will have more flexibility in setting income tax rates. However, that will depend on reaching agreement on a new fiscal framework and final passage of the Scotland Bill.”
It is proposed in the Scotland Bill that the Scottish Parliament will be given the power to set rates and bands of income tax from April 2017. It will also keep half of all VAT receipts, and be given the ability to top up welfare benefits and create new payments.
Income tax rates are to remain the same as in the rest of the UK for the time being, with far greater autonomy over tax rates and tax bands are due to be devolved as early as 2017. This may induce the Scottish Government to alter Scotland’s income tax landscape in the near future.
Public awareness of the changes is low. There have been calls for the proportion of income tax going directly to the Scottish Government to be detailed on employees P60 form.
Scottish taxpayers need to be accurately identified in order for HMRC to make the correct payment to the Scottish parliament in the block grant.
The responsibility for identifying Scottish taxpayers lies with HMRC, not employers. Scottish taxpayer status depends on the residence of the employee, not the place of work.
HMRC is in the process of identifying Scottish taxpayers according to their records. This is largely based on the latest home address the employee has provided to HMRC. It is important that individuals ensure that their details are up to date and they inform HMRC when they move home.
At the start of December HMRC began writing to those they had identified as Scottish taxpayers. The letter encourages individuals to ensure their address details are correct and explains that from next April, Scottish taxpayers who are employed or receive a pension will have a new tax code beginning with the letter ‘S’ to signify their status.
More details can be found on the Scottish Rate of Income Tax here.
Scottish Income Tax Rate Set 2016 – Highland Payroll Services