For the first time, the Scottish Parliament has used the new Scotland Act 2016 legislation. This enables the Scottish Government to fix their own income tax brackets and rates. The agreed rates for 2017-18 tax year are as follows:
- Scottish Basic Rate – 20% – on annual income above £11,500 (Personal Allowance) to £43,000
- Scottish Higher Rate – 40% – on annual income from £43,000 to £150,000
- Scottish Additional Rate – 45% – on annual income over £150,001
The main talking point of this announcement is that the Scottish Government has chosen to freeze the basic rate threshold at £43,000, when the rest of the UK will see this increased to £45,000 from April 2017.
Obviously, this is increased revenue for Scotland. But it also means that it will cost Higher Rate taxpayers more to live in Scotland than in the rest of the UK.
According to Simon Johnson of The Telegraph, this currently affects approximately 370,000 Scottish taxpayers; this figure will only rise with annual salary increases.
Scottish income tax is still administered and collected by HMRC, they then pay the requisite amount to the Scottish Treasury. The changes do not change your right to claim a tax rebate if you have overpaid tax. Scottish income tax rates only apply to non-savings income; not dividends or bank account interest.
Whether you pay UK or Scottish income tax is entirely dependent on where your main residence is situated. You pay either one, or the other, for a whole tax year. There is no proportionality involved, even if you spend part of the year in Scotland and the rest living in another part of the UK.
Interesting times…
