The Scottish Budget – What does it mean for me?December 15, 2017
The Scottish Rate of Income Tax (SRIT) came into force from 6 April 2016 and income tax in Scotland now differs from the tax you pay in the rest of the UK. The Scottish Budget on 14 December laid out the plans for the Scottish tax system for the 2018/19 tax year.
In the 2017/18 tax year the rates of tax are the same but higher rate tax starts at a threshold £2,000 lower which means £400 of additional tax for higher rate tax payers in Scotland in 2017/18.
In 2018/19 this gets more complicated. There are additional bands and different rates applicable in Scotland from April 2018. This means those on the lowest incomes will pay less in Scotland but those on higher incomes will pay more in Scotland. An income of £26,000 will be taxed the same anywhere in the UK but below this Scottish tax payers will be around £20 per annum better off and those above this will pay more tax. At an income of £50,000 you will pay £655 more in Scotland each year.
Who will be 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, golf club and any other indicators that show a property is your home. This is designed to catch those living in Scotland and working in London.
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 remains taxable at the rates and tax bands set by the UK Government and is expected to remain so for the foreseeable future.
To discuss any of the issues highlighted within the draft budget, or any other matter you require our help with, please contact any member of our tax team.
Kenneth McEwen – Tax Partner
Alan Davis – VAT Partner & Chairman
Dougy Agnew – Partner
Barbara McQuillan – Partner