On April 6th of this year a new Scottish Rate of Income Tax (SRIT) will be introduced. This measure was conceived to allow the Scottish Government greater autonomy in relation to revenue generation, on top of their current powers to levy stamp duty. As it currently stands the actual rate of tax paid by the Scottish taxpayer will not differ from those living elsewhere in the UK, just where the revenue is directed. As it stands currently the SRIT will be 10%. It will apply to wages, pensions and most forms of taxable income (with dividend and savings interest staying the same). The SRIT will be paid by those living in Scotland, even if they are employed and work in England. It is therefore not just Scottish employers who need to be aware of the changes. Since the vast bulk of Income Tax is collected via payroll anyone who employs someone living in, or who has their main residence in Scotland will have to be aware of the changes.
One might ask the purpose of this change in revenue collection if, with appropriate alterations to the Barnett formula, things remain the same. It is the power to alter the 10% going to the Scottish government that could have an impact. They are free to change this rate as they choose and so Scottish taxpayers could, in the future, see themselves having a greater or reduced tax burden as this rate fluctuates. Interestingly to increase this rate will disproportionally raise the tax burden on lower earner whilst reducing it will be proportionally much more beneficial. Though a recent Scottish Parliament vote to raise the rate was defeated, it serves as an indication that the rate, whilst keeping UK taxpayers at the same rate for the moment, could very well change in the future. HMRC through their recent campaign has made sure employers are aware of the upcoming changes, however it is worth ensuring that everyone is aware of the upcoming changes and deals with their payroll accordingly o allow a smooth transition to the new tax structure.