Amidst the headlines of all the new tax rates and who will and won’t be better off, there probably won’t be many who will feel too much sympathy for tax advisers. However following the changes announced yesterday, those of us advising Scottish taxpayers will now be dealing with one of the most complex tax systems in Europe.
Yes there are 5 new tax rates and thresholds at which these apply for us to work through but that is not what will cause much in the way of difficulty. Instead, it is how these will interact with other aspects of the UK tax system where the UK Treasury still retains control.
This will include matters such as the personal allowance, tax payable on dividends, the savings allowance, capital gains tax which is chargeable at the higher rate of 28% and tax relief for pension contributions, to name but a few. To calculate the liability where these sources are involved it will be necessary to apply the UK rates and thresholds.
Where we are coming from is that the integration of the two systems will not be straight forward and making sure these are all included within a tax calculation will be challenging.
It is however the system that Scottish taxpayers will be operating to from 6 April 2018 and so a summary of the proposed tax rates and allowances that will apply can be found here.
These changes will only impact Scottish taxpayers who pay income tax. If you are unsure if you will be regarded as a Scottish taxpayer then please check here.
For Scottish companies, charities and trusts yesterday’s changes will have no impact.
One other tax measure that was announced is a proposal to exempt first time buyers from Land and Buildings Transaction tax on properties up to the value of £175,000. This reflects a broadly similar proposal announced in last month’s Budget for the rest of the UK, albeit at a higher amount (£300,000) reflecting the generally higher value of properties elsewhere in the UK.