Budget news: "Thats except for viewers in Scotland"...
Derek Mackay presented a draft budget to Holyrood on Thursday 14 December 2017. It is subject to change and approval by the Scottish Parliament. Here are the “highlights”…
A ‘Scottish taxpayer’ is someone who is resident in the UK under the statutory residence test and meets any ONE of the following conditions:
- the taxpayer’s only one place of residence in the UK is in Scotland and the taxpayer lives there for at least part of the tax year
- the taxpayer has more than one place of residence in the UK and for at least part of the tax year the taxpayer’s main place of residence is in Scotland (i.e. he spends more time living there than in any place of residence elsewhere in the UK)
- the taxpayer is a Member of the Scottish Parliament or a Member of the Westminster Parliament or the European Parliament representing a Scottish constituency
If none of these apply the taxpayer may still be a Scottish taxpayer if he spends more days (at midnight) in Scotland during the tax year than anywhere else in the UK.
The Income tax system has been complicated again by the introduction of new tax bands, and even more taxpayers will be required to submit returns.
The higher rate and additional rate of income tax increase by 1% each. The basic rate band is now split into three bands, giving a total of five tax bands in 2018/19. There is a 19% starter rate up to £2,000. A basic 19% rate from £2,001 to £12,150. A 20% intermediate rate from £12,151 to £32,423. A higher rate of 41% from £32,424 to £150,000. And above that there is a 46% “top rate”.
This means the Scottish higher rate threshold is £44,273 in 2018/19 (personal allowance of £11,850 plus intermediate rate band of £32,423), compared to £46,350 in the rest of the UK (“rUK”).
On National Insurance contributions, the upper earnings limit for Class 1 and the upper profits limit for Class 4 remain aligned with the higher rate threshold which applies in the rUK. The marginal rate of tax and NI is 53% on earnings between £44,274 and £46,350. Self-employed at this profits level will be suffering a marginal rate of 50%
Savings income and dividend income are also aligned with rUK which will lead to some Scottish taxpayers being basic rate taxpayers for savings income but higher rate taxpayers for non-savings income. rUK tax bands also determine the amount of the savings nil rate band.
Capital gains tax rates are also reserved, so again some Scottish taxpayers will have a remaining basic rate band for CGT whilst being higher rate taxpayers for income tax purposes.
Personal pension scheme contributions are deemed to be paid net of 20% basic rate tax (whether or not the taxpayer has paid sufficient income tax to cover this amount), with tax relief given to higher rate and additional rate taxpayers via the extension of the basic rate and higher rate bands. Taxpayers earning over £24,000 need to complete a return to claim relief.
Donations to charities under gift aid are deemed to be paid net of 20% basic rate tax, with tax relief given to higher rate and additional rate taxpayers by extending basic and higher rate bands. Anyone who pays on the starter rate of 19% will find they need to complete a Tax Return to pay over the extra 1%. Anyone paying tax at a rate above 20% will need to complete a return to extend the relevant tax bands to obtain relief.
So more taxpayers are required to complete returns, the calculation has more tax bands and rates to complicate the dividend v salary/bonus calculations, and generally there are many more traps for the unwary. Don’t you miss the days when life was simpler, and the worst you were going to get was a BBC Scotland opt-out showing the shinty?
“We interrupt this broadcast to bring you a special news report. Hostilities have broken out between east and west following the breakdown of talks this afternoon. A full-scale nuclear strike is on its way to Britain, and the four-minute warning has been sounded. That's except for viewers in Scotland.” Naked Video