Scottish rate Income Tax – update for pension schemes
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 landfill to the Scottish Parliament.
The Scottish Parliament confirmed that they are to set up their own tax agency to be known as Revenue Scotland. The new tax agency will become responsible for the administration of Scotland’s devolved taxes.
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.
If for example, the Scottish Parliament set a rate of 9%, the Scottish rates of basic rate, higher rate and additional would all be 1% less than the rest of the UK. Conversely, if the Scottish rates were set higher than 10%, the Scottish rates would be higher than the rest of the UK. The Income Tax rates will apply to all Scottish taxpayers.
HMRC have recently published an update for pension scheme administrators on Income Tax for relief at source on contributions to registered pension schemes by Scottish taxpayers.