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Newsletter issue - February 2017.
Shortly before Christmas, the Scottish draft budget contained an announcement that Scottish taxpayers will start paying the 40p higher rate of income tax at a lower point than taxpayers elsewhere in the UK. This announcement means that businesses across the UK, not just in Scotland, will need to review their payroll systems to ensure that the proposed change can be accommodated.
Scotland's Finance Secretary Derek Mackay confirmed that the Scottish Government intends to restrict increases in the rate at which people start paying the higher rate of income tax to inflation only. This compares with the UK Government's proposal to increase the point at which people across the rest of the UK start paying the 40p rate to £50,000 by 2020/21. This will be the first time that the Scottish Government uses its powers to create different rates between Scotland and the rest of the UK. In addition to affecting Scottish businesses, this change will also affect any employer outside of Scotland who either has or is looking to hire employees living in Scotland earning at or above the new Scottish higher rate threshold.
From April 2017, the Scottish Parliament will assume responsibility for further powers over income tax, enabling it to determine the rates and thresholds for income tax on non-savings and non-dividend income. It will not have control over the tax-free personal allowance, which remains reserved to the UK Government or other aspects of income tax such as reliefs, deductions or what counts as taxable income.
