Budget. In December 2016 the devolved administration at Holyrood announced its Budget. One notable announcement was that the income tax rates (20%/40%/45%) would not be changing for 2017/18. This has, however, been tempered by the further announcement that the Scottish basic rate band will not increase in line with the main UK threshold of £45,000 (including the personal allowance).
Instead, the Scottish higher rate threshold will be set at £43,430 (having increased only with inflation), meaning a higher rate Scottish taxpayer with identical income to their other UK counterparts will be £314 worse off per annum.
Codes. Your clients will need to ensure they correctly process PAYE coding notices with the Scottish “S” prefix in their payroll software, or else they run the risk of underpayment – for which they could be held liable.
Planning. It might seem like a trivial amount; however, it is worth remembering that your client will only be classed as a Scottish taxpayer if they spend at least as much time of the tax year in Scotland as they do in the rest of the UK. If you have clients that spend roughly half their time in Scotland, it might be worth looking at staying that extra week or so in other parts of the UK, and politely informing HMRC that they are no longer classed as a Scottish taxpayer.
From April 2017, higher rate Scottish taxpayers will be £314 worse off per year than equivalent taxpayers in the rest of the UK. Check to see if minor changes to living patterns could disapply the “Scottish” status and save money.
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