8 May 2012
Income tax rates in Scotland may change as a result of the Scotland Act 2012, which received Royal Assent on 1 May.
Among other matters this Act gives a power to the Scottish Parliament to vary rates of income tax for Scottish taxpayers. It is intended that this will apply from 6 April 2016. If it is exercised, all rates will vary from the UK rate by the same percentage.
For example, the rates might be increased by one percentage point to give a 21% basic rate, a 41% higher rate and a 46% additional rate (reflecting the planned reduction in the top UK rate from 50% to 45% next year).
Alternatively, they might be reduced (but not by more than 10 percentage points). A reduction of two percentage points, for example, would give rates of 18%, 38% and 43%.
Personal allowances, and all other aspects of the income tax system, will continue to be the same for the whole of the UK.
A ‘Scottish taxpayer’ is, broadly, a taxpayer living in Scotland. PAYE codes will indicate whether an individual falls within this category, and the Scottish rates will be applied by employers irrespective of where they are themselves situated.
The new rates will apply only to income from earnings and pensions. Tax on savings income will not be affected.
From a future date, expected to be April 2015, stamp duty land tax and landfill tax will be replaced, respectively, by devolved taxes on land transactions and on waste disposal to landfill, in Scotland.
The Act also gives powers for new taxes to be created in Scotland and for additional taxes to be devolved.