Shake-up in Scottish Income Tax rules, but business as usual for taxpayers

Scottish taxpayers will see a new tax code appearing on their payslips from this week as the Scottish Parliament sets income tax levels for the first time.

But while the new Scottish Rate of Income Tax (SRIT) marks a major change politically, it should not be too taxing for the people paying it.

Taxpayers north of the border can rest assured that their rates and methods of payment will remain the same, according to Tayside-based solicitors and estate agents Miller Hendry.

The new SRIT, introduced on April 6th 2016, is provided for in the Scotland Act 2012. Up until now, all income tax has been set by, and paid to, the UK government. After a great deal of speculation on the new rate of income tax, Finance John Swinney announced in his recent budget plan that Scots will pay 10 per cent SRIT.

However, Scottish taxpayers will continue to pay income tax at the total rate of 20 per cent, as before. The difference is that the tax paid will now be divided between the Scottish and UK governments.

In practice, this means that for basic rate taxpayers paying 20 per cent income tax, the Scottish government will receive 10 per cent and the UK government will receive the remaining 10 per cent.

Alan Matthew, partner and employment law expert at Miller Hendry, said: “The Scottish Rate of Income Tax applies to UK taxpayers with a main residence in Scotland. Employees and those in receipt of a pension will see a change in code on their payslip but apart from that, everything stays the same. If you pay income tax by PAYE, it will be collected as it is now, by HM Revenue and Customs.

“Other than how the tax will be administered, no fundamental changes will occur. However, as the government have longer term plans for income tax, significant changes may impact employees and employers in the near future.”