From 6 April 2016, the Scottish Parliament will have the power to set the rate of income tax for Scotland. This might be difficult for HMRC as it will likely cause some problems determining who qualifies as “Scottish”.
For income tax purposes, it will much depend on an individual’s residence status. The current proposal for determining the residency of an individual is the location of their sole or main residence.
If that isn’t clear cut, then a day counting test is proposed. Anyone with homes in both Scotland and the rest of the UK or has close economic links to Scotland will need to understand the new rules when they are finalised later this year and ensure they know where they will be a tax resident.
Setting aside matters of national pride and focusing on the tax aspects, whether you want to be Scottish or not will depend on the respective rates of tax.
At this stage, we don’t know if income tax rates will be higher or lower than the rest of the UK, but new powers will allow Scottish Parliament to vary the income tax rate by up to 10% above or below the main UK rates.
It will also be interesting to see whether or not the Scottish Government will obtain further devolved tax powers to implement capital gains tax or inheritance tax changes.
For the rest of the UK, David Cameron has announced that there will be no VAT, national insurance or income tax increases for the next five years. For more information or if you need any guidance with your tax planning, please contact our tax team on 01254 679131 or email firstname.lastname@example.org.