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Scottish tax – the resolution is agreed

By Ian Holloway, head of legislation and compliance at Cintra HR & Payroll Services

2017-18 will go down as a significant tax year for the United Kingdom.

On 21 February 2017, the Scottish Parliament approved the Scottish Rate Resolution that separates the UK into two tax regimes for certain non-savings and non-dividend taxable income:

1. The regime applicable to Scottish taxpayers (those with a tax code prefixed S), and
2. The regime applicable to the rest of the UK (rUK taxpayers)

Finance secretary Derek Mackay’s first Budget was the subject of much heated debate. However, the minority Scottish National Party (SNP) government managed to secure the resolution courtesy of voting abstentions from the Scottish Greens.

The result is that Scottish taxpayers will see a reduction of £500 to the 2016-17 Basic rate limit as follows:

Basic £0-£32,000
Higher £32,001-£150,000
Additional over £150,000

Scottish Basic £0-£31,500 (-£500 change)
Scottish Higher £31,501-£150,000 (+500 change)
Scottish Additional (£0 change)

This is the only thing that has changed. However, a different Basic rate limit for Scottish taxpayers compared to rUK taxpayers and one UK-wide Personal Allowance gives rise to different earnings bands.

In 2017-18, assuming that the taxpayer is in receipt of the UK Personal Allowance £11,500:

Basic rate 20%
rUK taxpayers £0-£45,000
Scottish taxpayers £0-£43,000

Higher rate 40%
rUK taxpayers £45,001-£150,000
Scottish taxpayers £43,001-£150,000

Additional 45%
rUK taxpayers over £150,000
Scottish taxpayers over £150,000

A Scottish taxpayer with employment earnings of, say, £44,000 will pay Income Tax at 40% on a portion while his rUK taxpayer colleague will have a 20% marginal rate. Although, according to Maree Todd, SNP member of the Scottish Parliament (MSP) for the Highlands and Islands, it is a myth to say that Scotland will be the highest-taxed part of the UK:

“Only a fool would look at income tax in isolation, and the people of Scotland are not fools. If we look at the combination of income tax and council tax, we see that we pay less in Scotland than people in the rest of the UK pay. Scotland is a great place to live and in which to do business. Taxpayers in Scotland get more for their money; there is a much better deal than there is anywhere else in the UK.”

To be honest, I had never thought to take into account my council tax when looking at my tax burden. This English fool only sees the crude fact that Scotland will be the highest taxed part of the United Kingdom in 2017-18. This is in terms of the income tax take on certain non-savings and non-dividend taxable income for Scottish taxpayers.

Note that the Scottish bands do not affect the bands on which the Basic Earnings Assessment is performed for employees that are provided with employer-supported childcare from 6 April 2011 – e.g. childcare vouchers. This Assessment is performed using the rUK bands and determine the following tax and NICs exempt amounts:

(Marginal rate; threshold; weekly; monthly; annual)
Basic; £0-£45,000; £55; £243; £2,915
Higher; £45,001-£150,000; £28; £124; £1,484
Additional; over £150,000; £25; £110; £1,325

Posted on 7th March 2017 by Jerome Smail



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Are the new rates for the National Minimum Wage and National Living Wage high enough?