UK and International Tax news

Devolved Tax In Scotland

Monday 14th May 2012

The Scotland Act 2012 has recently received Royal Assent and brings about the largest ever transfer of financial powers to Scotland since the creation of the UK.

The Act gives the Scottish Parliament the power to set a Scottish rate of income tax to be administered by HMRC for Scottish taxpayers, which is expected to apply from April 2016. The Act also fully devolves the power to raise taxes on land transactions and on waste disposal to landfill, to take effect in April 2015, at which point the existing SDLT and Landfill Tax will not apply in Scotland. The Act also provides powers for new taxes to be created in Scotland and for additional taxes to be devolved.

For employees and pensioners, the income tax change will be applied through PAYE with HMRC issuing tax codes to employers prior to April 2016 who will identify those employees who are Scottish taxpayers, and then 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.

The definition of a Scottish taxpayer is based on the location of an individual’s main place of residence.

HMRC is to issue further guidance on certain operational aspects of the new legislation including tax relief for pension contributions and gift aid in due course.

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