Tax Newsletter | December 2019
Merry Christmas from our tax team
Here are some important areas of tax for you to consider and some of the changes that will be coming in 2020…
Scottish Income Tax
In 2018/19 the rates of tax differed in Scotland for the first time since The Scottish Rate of Income Tax (SRIT) came into force from 6 April 2016. While the tax bands were already different from those for the rest of the UK, 2018/19 was the first year in which the rates were altered. This means those on the lowest incomes pay slightly less in Scotland while most on higher incomes pay more in Scotland.
What income does the SRIT affect?
The SRIT only affects non-savings income which includes employment, pensions, self-employment and property income. All savings and investment income remain taxable at the rates and tax bands set by the UK Government and is expected to remain so for the foreseeable future.
In 2019/20 the rates in Scotland are:
Starter rate 19% £0 – £2049
Basic rate 20% £2,049 – £12,433
Intermediate rate 21% £12,433 – £30,930
Higher rate 41% £30,930 – £150,000
Additional rate 46% £150,000 +
The personal allowance along with the other allowance such as savings and dividends are set by the UK Government and apply to Scottish taxpayers on the same basis as all UK taxpayers.
Due to the December 2019 election and the announcement from Scottish Finance minister Derek Mackay that he will only announce the Scottish budget after the UK budget. The UK budget is due in the first hundred days from 13 December so could be as late at March 2020 which means for the Scottish budget to be later, the Scottish parliament will then have to pass a budget before the start of the new tax year on 6 April 2020.
How to define a Scottish taxpayer?
If you live full time in Scotland you will be a Scottish taxpayer. If you split your time between Scotland and elsewhere in the UK you need to look closely at the definition of a Scottish taxpayer. Contrary to speculation, this is not based on the number of days in Scotland. It is based on a number of factors in which the number of days can play a part. The main deciding factor is where your home is. The home or main residence is determined by where your family is based, where your main ties are such as your doctor, dentist and any other indicators that show a property is your home. This catches those living in Scotland and working in London.
Where individuals have the ability to choose how they take income, such as those with their own company who can choose between salaries and dividends, there is careful planning that can be done. If an individual has more than one home throughout the UK it is important to consider the position personally to ensure you are taxed on the correct rates. Gift aid & pension contributions still receive relief based on the UK rates at 20%.
What should you do next?
If after reading this you think you may be a Scottish taxpayer or you are a Scottish taxpayer and would like to know more about how this affects you personally, please get in touch with Barbara McQuillan (email@example.com) or Lucy Crow (firstname.lastname@example.org).
Conservative Government Corporation Tax Consequences
The Conservative party winning the election by the largest margin since the 1980s, clarifies the United Kingdom’s corporation tax plans going forward.
Rate of Corporation Tax
The party’s U-turn will see the rate of corporation tax maintained at 19%, instead of the previously indicated decrease to 17%. The party states that this will give the Government an extra c£6bn a year more revenue than it would have with the reduced 17% rate.
Research and Development (R&D) tax credit
The Conservative party have stated that they will increase the R&D tax credit rate from 12% to 13%. This is a relief available to large companies. The definition of a large company depends on three criteria: headcount, turnover and gross assets. If your company employs 500 staff or more and have either turnover of more than €100m or €86m in gross assets them you will fall into the scheme.
Making Tax Digital
Making Tax Digital is already in place for VAT but not yet for income tax. It was scheduled to come in from April 2020 but is now pushed back to 2021 at the earliest. While it has been pushed back it is still expected to be implemented in the future. We have been helping our clients navigate the new digital VAT service and we are currently working with software providers and updating our website to ensure we and our clients are ready when Making Tax Digital arrives for income tax.
Get in touch
To discuss any of the issues highlighted within this newsletter, or any other matter you require our help with, please contact us by using the form below