Adjustments to UK tax reliefs for Scottish tax regime

With just over two weeks to go until Scotland’s devolved tax rates come into effect, HMRC has published a notice of how five UK tax reliefs will continue to work as they were intended when Scottish rate of income tax (SRIT) and bands change in April 2018

This is required because of the new discrepancies between SRIT and the rest of the UK.

From 6 April, those earning £11,850 - £13,850 in Scotland will pay a starter rate of 19%. From £13,850 - £24,000 the rate is 20%, with a new intermediate rate of 21% from £24,000 - £43,430. The higher rate of 41% applied for earnings over £43,430 and up to £150,000, when the rate is 46%.

The marriage allowance relief allows taxpayers to transfer 10% of their tax-free personal allowance to their spouse or civil partner, reducing their tax bill by up to £230 in 2017 to 2018, and £238 in 2018 to 2019. HMRC says the UK government will ensure that all those claiming marriage allowance in Scotland can continue to do so at the current rate (20%).

There will also be changes to ensure that Scottish taxpayers can benefit from the right rate of tax relief on gift aid. Gift aid will continue to be paid to charities at the basic rate, with Scottish taxpayers able to claim the correct amount of additional relief on top of this.

On pensions relief, HMRC says the UK government has confirmed that current processes will continue while it works with stakeholders to establish how this will work in the longer term.

For 2018 to 2019, Scottish taxpayers who receive relief on their contributions at source will, therefore, continue to receive relief in their pension pot at 20%, with no adjustment for those taxed at a rate of less than 20%, and scope for those taxed at a rate higher than 20% to claim additional relief.

The UK government will make changes so that Scottish taxpayers who receive a social security pension lump sum will be taxed, where appropriate, at the new Scottish starter rate.

Finance cost relief will continue to apply at 20%, the same rate applicable to landlords across the UK.

Changes to tax reliefs following the Scottish Government’s Budget is here.

Report by Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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