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Scottish income tax may cost £35m to introduce

29th Jan 2016
Freelance journalist
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Introducing a Scottish Rate of Income Tax may cost £35m, the National Audit Office (NAO) has estimated.

The forecast of costs (until 2018-2019) is for introducing the SRIT, which will start on 6 April and will affect 2.6 million Scottish taxpayers.

The Scottish government reimbursed HMRC £1.7m of the cost of introducing the Scottish rate during 2014-2015.

The NAO said that HMRC’s preparations for the Scottish rate had been “thorough” and that modifying existing IT capability had “minimised the risks and costs associated with the need to develop an entirely new system to administer the [Scottish rate].”

But the NAO also said that HMRC had only put “limited resources” into planning for potential tax loss as a result of the Scottish rate. “Given the significance and complexity of the [Scottish rate] project, HMRC will need to react quickly to the changing compliance environment within the UK from April 2016,” it said.

From 6 April, the income tax rates set by the UK government that apply to the ‘rest of the UK’ will be reduced by 10p in the pound for Scottish taxpayers, and increased by the [Scottish rate].

The basic, higher and additional earnings bands are to remain the same for the UK and the Scottish rate for the 2016-17 tax year.


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By Hugo Fair
01st Feb 2016 11:23

Wait for what's around the corner ...

The rules for SRIT in 2016-17 are so simple that it's hard to see from where NAO managed to get their £35m figure ... unless they've cottoned on to the 'killer waiting in the wings' - which Nick alludes to in his final 5 words ("for the 2016-17 tax year").

Wales has been promised (and so Scotland is now demanding) considerably greater control over their tax-setting powers ... specifically to be able to introduce thresholds (with associated rates) in any structure that they want - i.e. unrelated to what we're used to in rUK (aka the rest of the UK)!

So we can look forward to scenarios like there being 3 'bands' in England, 5 in Wales and 7 in Scotland ... with no correlation between these sets of bands or indeed the rates applicable to them.

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