How will devolved Scottish income tax work?

Scottish Parliament
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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..

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About Nick Huber

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I’m a specialist business journalist and have a particular interest in tax and technology. 


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24th Jan 2014 16:10

Yet another thicket of complexity

I simply can't believe that the government wants to introduce yet another level of complication into the UK's tax system.  It's a huge quagmire as it is.

They should focus on simplification and unification, not on different rules.

Have they actually spoken to people who are on the ground preparing tax returns and calculating tax?

Give me strength.


Thanks (2)
27th Jan 2014 08:50

It's not the Government....

.... it's the shortbread senate at Holyrood.

And yes, they have consulted. Just like they consulted over EU issues, the poundzone, etc, etc!

Thanks (0)
By Myshkin
27th Jan 2014 14:25

West Lothian

If Scotland can set its own tax rates without any input from English MP's why are Scottish MPs going to be allowed to vote on English tax rates?

Thanks (1)
By dstickl
27th Jan 2014 15:32

@Myshkin: The next UK General Election should be on Ind Day 2016

Myshkin wrote:

... why are Scottish MPs going to be allowed to vote on English tax rates?

A very good point, to which my answer has to be: IF Scotland votes for Independence in 2014, THEN the next UK General Election - due to be held in May 2015 - should be slipped by a mere year until the Scottish (Labour etc) MPs have to leave the House of Commons, on Independence Day in 2016.

Equally, any Scottish passport holding Peers currently "sitting" in the House of Lords should be barred, with effect from Independence Day in 2016, thus saving UK taxpayers some money to reduce the UK deficit and the UK debt. 

Thanks (1)