Scottish taxation changes
The Scotland Act 2012 came into law on 1 May 2012 and gives the Scottish Parliament the power to set a Scottish rate of Income Tax which will be administered by HMRC for Scottish taxpayers. The Act also fully devolves the power to raise taxes on land transactions and on waste disposal to landfillto the Scottish Parliament. Revenue Scotland will be responsible for taxes similar to the current Stamp Duty Land Tax and Landfill Tax which will be replaced with Land and Buildings Transaction Tax and Scottish Landfill Tax. The changes are expected to take effect from April 2015.
The new Scottish Income Tax rate is expected to apply from 6 April 2016. In practice, the Income Tax rates in Scotland will be reduced by 10% and the Scottish Parliament will have power to set the rate. If the rate is set at 10%, the Scottish rates would be the same as the rest of the UK. HMRC will issue tax codes to employers in the months before April 2016 which will identify those employees who are Scottish taxpayers, and employers will deduct tax at the appropriate rates, which may be higher or lower than or the same as those which apply in the rest of the UK.
This will be driven by a taxpayer’s main place of residence. Employers across the UK will need to ensure their systems are updated to work within the new rules. HMRC has recently published an FAQ document on the implications of The Scotland Act 2012.