Scottish Rate of Income Tax

04 Jan Scottish Rate of Income Tax

The Scottish government has proposed that the Scottish rate will be 10% for the tax year 2016-17. As the rate is set at 10%, the Scottish rates will remain the same as the rest of the UK for the next tax year. For example, Scottish taxpayers that pay tax at the basic rate of 20% will see this rate reduced to 10%. In addition they’ll pay the Scottish rate of 10% on top of this, giving a total of 20%. Scottish taxpayer status applies for a whole tax year. It will not be possible to be a Scottish taxpayer for part of a tax year.

The Scottish Rate of Income Tax (SRIT) will commence on 6 April 2016 and will be administered by HMRC on behalf of the Scottish government. The SRIT will be payable on the non-savings and non-dividend income of those defined as Scottish taxpayers.

The definition of a Scottish taxpayer is generally focused on the question of whether the taxpayer has a 'close connection' with Scotland or elsewhere in the UK. The liability to SRIT is not based on nationalist identity, location of work or the source of a person’s income e.g. receiving a salary from a Scottish business.

HMRC’s guidance states that for the vast majority of individuals, the question of whether or not they are a Scottish taxpayer will be a simple one – they will either live in Scotland and thus be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer.

However, HMRC acknowledges that there will be cases where the decisions as to a taxpayer's status is not so clear cut and technical guidance has recently been published that looks at determining a person’s place of residence. The Income Tax rates in Scotland will be reduced by 10% and the Scottish Parliament will have power to set the Scottish rate at the same, lower or higher rate than the rest of the UK.

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