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The Scotland Act has received royal assent, giving powers for the Scottish parliament to set a local rate of income tax different from that of the UK’s.
A new rate is expected to be introduced from 6 April 2016, and ITA 2007 will be amended to peg the income tax rate for Scotland’s taxpayers at ten percentage points below the main UK rate.
A Scottish rate of 10% will therefore give the same rate as the rest of the UK, while a rate above or below 10% will provide an overall rate that is higher or lower.
Powers over equivalents for stamp duty land tax and landfill tax will be fully devolved from April 2015.
For employees and pensioners, the income tax change will be applied through PAYE.
HMRC will issue tax codes in the months before April 2016 to identify employees who are Scottish taxpayers, and employers will deduct tax at the appropriate rates, which may be higher or lower than or the same as those that apply in the rest of the UK.
The definition of a Scottish taxpayer is based on the location of an individual’s main place of residence.
