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Scottish Taxpayers 'Grappling With Complexity Following Tax Devolution': CIOT

by Jason Gorringe, Tax-News.com, London

12 April 2018


The Chartered Institute of Taxation says Scottish taxpayers now face more complexity than ever before, due to the introduction on April 6, 2018, of new rates and bands of income tax.

CIOT said taxpayers resident in Scotland now have to grapple with as many as five new rates and bands of income tax and ensure they continue to receive the correct amount of pension tax relief.

In addition, the Institute highlighted the continuing anomaly that will result in some middle-income earners paying a higher marginal rate of tax and national insurance than those on higher incomes.

Moira Kelly, Chair of the Chartered Institute of Taxation's Scottish Technical Committee, said: "Today is the day that taxpayers across Scotland will really start to notice the impact of tax devolution on their pay packets as a result of the introduction of new rates and bands of Scottish income tax. By introducing a new 19 [percent] starter rate and a new 21 [percent] intermediate rate – as well as increasing the higher and top rates of tax – every Scottish taxpayer who gets their income from a salary, a pension, renting a home, or profits from self-employment will now be exposed to as many as five different rates and bands of tax."

"Complexity was always going to be the price to pay for having control over parts of the income tax regime. While the differences next year may not be huge, they are noticeable and they expose Scottish taxpayers to increasing levels of complexity and potential confusion than ever before."

"It has never been more important for Scottish taxpayers within the pay-as-you-earn (PAYE) system to make sure that their tax code starts with an 'S.' This means that HMRC has identified them as a Scottish taxpayer and should prevent any unwelcome surprises – such as finding out that they have paid too little tax – further down the road."

"Scottish taxpayers should continue to be eligible to receive Marriage Allowance worth up to GBP238 a year where applicable but for those paying into their pension under 'relief at source' arrangements, they may be entitled to extra tax relief if they pay income tax at a rate higher than the basic rate. They can get this either by phoning HMRC to ensure that this is included in their tax code or by completing a self-assessment tax return at the end of the year."

"The misalignment between devolved income tax and UK-wide national insurance [the UK's social security level] will also result in the anomaly of some middle-income earners paying a higher marginal rate of tax and NI – equivalent to 53 percent of their income – than some on higher incomes."

"Things get even more complicated for Scots who also get savings or dividend income. They now face the prospect of having to check both the UK and Scottish rates and bands of income tax to work out what they owe."

"The nature of our tax system already makes it very difficult for the public to understand what they pay and when they pay even before these extra complexities came into effect. It is a timely reminder of the need to move the debate on the devolved taxes away from simply working out what we will pay and when we pay it, but also to consider how these choices interact with the wider UK tax regime."

TAGS: tax | insurance | United Kingdom | self-employment | social security | individual income tax | Tax | Scotland

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