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Glasgow
+44 (0)141 221 2984

Edinburgh
+44 (0)131 225 6366

Stirling
+44 (0)1786 451745

Dumbarton
+44 (0)1389 765238

Hamilton
+44 (0)1698 459444

French Duncan

DECEMBER 2015 - Postman delivers SRIT letters

The Scottish rate of income tax (SRIT) will come into effect in April 2016. This will cover earnings of the employed and self-employed, pensions and property income (wherever the property is located). It will not cover savings income or dividends. It will apply to Scottish taxpayers, that is, individuals whose sole or main residence is in Scotland, regardless of where they work.

It will not apply to individuals who reside in England, Wales or Northern Ireland, regardless of whether they work in Scotland. It does not matter where employers are based. All other aspects of tax remain under UK control, including personal allowances and other tax reliefs.

While UK tax rates remain at 20, 40 and 45%, under SRIT the top 10% will be removed and the Scottish Government will be entitled to replace this with whatever rate it chooses. For example, if it chooses to increase the rate to 11%, the overall tax rates for Scottish taxpayers will become 21, 41 and 46%.

HMRC is now in the process of sending out Scottish Rate of Income Tax (SRIT) letters to 600,000 Self-Assessment taxpayers – those who are purely Self-Assessment and those who have a mixture of PAYE and Self-Assessment – and 2 million PAYE taxpayers.

Self-Assessment letters were issued first, starting from 30th November, with the rest following over the next couple of weeks. The purpose of the letter is to advise taxpayers that HMRC has identified them as having Scottish status. For most taxpayers no further action will be required.

Although the rate of SRIT is not due to be announced until 16 December, HMRC has decided to issue the letters now due to low levels of awareness about SRIT.

A point of interest for employers is the fact that there remains a lack of clarity about informing HMRC of a change of address – and the responsibility resting with the employee – but where does this leave employers and Real Time Information requirements?

Further information is to be given in the next HMRC Employer Bulletin and in the February 2016 Employer Bulletin.

Furthermore, at one stage letters were not going to be issued to ‘pure Self-Assessment’ taxpayers – as they would self-assess status and tax liability – but this has been decided against within HMRC, even though it is some way off before Self-Assessment taxpayers will need to complete their first ‘S’ tax return.

All companies in the UK, many of which will have Scottish and non-Scottish taxpayers on their payroll, will need to apply the new rules. Consequently, payroll operations will become more complex. There is huge ignorance about these changes which are going to affect us all.

Should you be one of the 600,000 taxpayers or 2 million PAYE taxpayers who receive a SRIT letter from HMRC yet remain unsure about what to do next, then it would be wise to seek professional advice.