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Scottish taxes

September 30, 2014 | No Comments

Scotland has spoken and the majority of people decided they wanted the country to stay in the UK. However, this outcome doesn’t mean that things will stay the same. We know of two new Scottish taxes already being introduced from 1 April 2015, along with variations to income tax rates for Scottish taxpayers from 6 April 2016.

If you’re planning to buy land or buildings in Scotland, you should be aware that the tax paid on top of the purchase price – for completion dates on or after 1 April 2015 – is uncertain at this point. This is due to Stamp Duty Land Tax (SDLT) being replaced with Land and Buildings Transaction Tax (LBTT) for sales of land and buildings in Scotland (from that date).

The SDLT will still apply to land transactions in England, Wales and Northern Ireland, but the LBTT will have different rules. For example, LBTT will have a nil rate band along with two other bands, which we think will probably detail the different rates for residential and non-residential properties. We expect the LBTT rates and thresholds to be revealed in the Scottish Government’s budget in October.

The second new tax starting from 1 April 2015 is a Scottish equivalent to landfill tax. The rates and thresholds for this will also be announced as part of the Scottish Budget for 2015/16.

From 6 April 2016 the Scottish Rate of Income Tax (SRIT) will allow 10p out of each tax band to be replaced by the Scottish Government. This variation will apply to all Scottish resident individuals, including pensioners who fall into the new ‘Scottish taxpayer’ definition. However, the personal allowances will not change and the SRIT has to apply within the UK’s tax bands.

It’s currently agreed (and this could change again following negotiation for further powers) that the rate of SRIT must be the same for all tax bands. For example if the SRIT is set at 10p, the rates will stay the same for the whole of the UK: 20%, 40%, and 45%; if the SRIT were set to 15p, Scottish taxpayers would pay income tax at 25%, 45% and 50%.

There’s now a brand new tax authority, Revenue Scotland, that’s been created to administer these new, and any future devolved, taxes. Income tax, including SRIT, will still be administered by HMRC.

Please don’t hesitate to get in touch with us if you have any questions.