Chartered Tax Advisers & Accountants

Scottish Income Tax

Published On: 30 March 2016
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Scotland’s First Minister has announced that if she remains as the First Minister after the May election, the Scottish government will not follow the UK Chancellor’s plans to increase the basic rate threshold from £32,000 to £33,500 from April 2017.  Instead any increase will be based on inflation only.  If re-elected, there will be no variation on income tax rates even though the Scottish government has the power to do so.

It is also worth noting that virtually all political parties in Scotland except the Scottish Conservatives have indicated that they will not apply the increase in the basic rate threshold.

So, what would this mean to a Scottish taxpayer?  

 

From April 2017

 

 

 

 

 

 

 

 

 

A taxpayer earning £50,000

           

 

 

Scottish taxpayer

     

UK taxpayer

   

 

 

Applying the proposed Scottish threshold

 

Applying the UK threshold

 

 

 

     

£

       

£

 

 

Salary

   

50,000

 

Salary

   

50,000

 

 

Less Personal Allowance

(11,500)

 

Less Personal Allowance

(11,500)

 

 

Taxable Income

 

£38,500

 

Taxable Income

 

£38,500

 

 

Income Tax Due

     

Income Tax Due

   

 

 

31,887

 @ 20%

 

6,377

 

33,500

 @ 20%

 

6,700

 

 

6,613

 @ 40%

 

2,645

 

5,000

 @ 40%

 

2,000

 

 

£38,500

       

£38,500

     

 

 

   

Tax Due

£9,023

     

Tax Due

£8,700

 

 

             

Difference

£323

 

This is the first major change in the income tax system and it will be interesting to see how this will be implemented in practice, especially, for tax software developers who will hopefully be putting their thinking caps on now!

There is still the question of “Who is a Scottish taxpayer?”  Following drafts guidance in June 2015, there has been no further update so for some taxpayers there is still uncertainty on whether they will be regarded as a Scottish taxpayer.  Our current analysis of ‘Will you be a Scottish taxpayer?’ can be found at http://msactax.co.uk/news/who-will-be-a-scottish-taxpayer/.