All Scottish residents to pay new devolved income tax rate from 2016

The new Scottish rate of income tax to be controlled from Holyrood has moved a step nearer with the publication by HM Revenue and Customs of the technical advice on who will need to pay the new tax when it comes into effect from April 2016.

The Scotland Office insisted it would be “simple for most people to work out” as the main factor in who will be a Scottish taxpayer paying the new SRIT will be residency in Scotland.

The guidance, contained in a 19-page document, also looks at cases where people live, work and study in different parts of the UK and explains who will be eligible to pay the new Scottish tax.

The following are two case study examples.

• Throughout the whole of the tax year, Sharon lives in a flat in Dumfries but is employed by a company based in Carlisle, where her office is situated. The location of your employer or where you work is not relevant to deciding whether you are a Scottish taxpayer. Although Sharon works in England, her place of residence is in Scotland, so Sharon is a Scottish taxpayer.
• Throughout the tax year, Jack is employed by an oil company working four weeks on/four weeks off, on a rig in Scottish waters. When not working, Jack lives at the house that he owns with his long-term partner and children in Leicester. All of his possessions are in Leicester, his car is registered and he is registered to vote in Leicester. Jack’s main place of residence is in Leicester. His family and his possessions are there and he spends all his non-working time there; he is thus not a Scottish taxpayer.

David Mundell, the Scottish Secretary, welcomed the progress being made on the new Holyrood power and called on the Scottish Government to set out its plans for taxpayers in Scotland.

Earlier this week, John Swinney, the Deputy First Minister, made clear that the Scottish Government would have to set a rate for SRIT this year in order to maintain revenue of around £5bn a year from next April. Following the knock-on effects of Chancellor George Osborne’s additional £3bn spending cut, that will see Scotland’s budget cut this year by an additional £107m, Mr Swinney admitted he would have to consider the option of tax rises.

Mr Mundell noted what he called the Scottish Government’s “reluctance to press ahead with fiscal autonomy” could be explained by the fact that the basic rate of income tax in Scotland would need to more than doubled to cover the nearly £10 billion spending gap identified by the economic think-tank, the Institute of Fiscal Studies. “Even the First Minister now accepts that fiscal autonomy would be a burden for Scotland to shoulder; they are demanding something they don’t want, so that they can complain when they don’t get it,” claimed the Secretary of State.

It has been estimated that a 1p increase on the basic rate of income tax in Scotland would generate an additional £425 million while a 10p increase would provide an extra £4.2 billion. People have until the end of July to comment on the draft technical guidance.

Herald: 13 June 2015