How will devolved Scottish income tax work?
With only eight months to go until the referendum on Scottish independence, tax is becoming one of the main issues in the campaigns for both sides.
But regardless of whether the Scots vote to remain in or outside the UK, Scotland’s tax system is set for some significant changes, including devolving power over setting income-tax rates. Some tax experts are predicting the changes will cause even more complications for UK businesses and tax officials on both sides of the border.
From April 2016, under the Scotland Act the Scottish government will be able to set income tax rates higher or lower than the UK rate. The three main rates of income tax (20%, 40% and 45%) have to be changed by the same amount.
Last November, the UK government claimed that taxes in Scotland could rise by £1,000 per person per year if it leaves the UK – although the Scottish government dismissed the figure.
A paper by the Institute for Fiscal Studies said that an independent Scotland would need to raise taxes, cut spending or both by more than plans already announced by the UK government to create a sustainable economy.
Earlier this week, Sarah Walker, deputy director and head of devolution team at HMRC told the Scottish parliament’s public audit committee that the new Scottish tax rates would..