Scottish income tax changes clarified by HMRC

9th April 2013

HM Revenue and Customs (HMRC) has unveiled fresh guidance regarding the implications of the Scotland Act 2012, which enables the Scottish Government to set its own rate of income tax for its residents for the first time in more than three centuries.
 
The act, which hands Scotland fiscal autonomy from the rest of the United Kingdom, is due to come into play from April 1 2016. The nation will be empowered to set its own rate of personal income tax, charged on the non-savings income of Scottish taxpayers.
 
As a result of the impending changes, HMRC has revealed all Scottish taxpayers in Pay as you Earn (PAYE) will receive a tax code that begins with S. Tax codes for the 2016-17 tax year will be provided in January and February 2016, while employers across the UK will be required to upgrade their systems in readiness for the new rulings.
 
HMRC has also outlined proposals for determining Scottish tax residency. On the whole, individuals predominantly living in Scotland will be deemed Scottish taxpayers. Additionally, taxpayers with more than one place of residence in the UK must provide HMRC with their main place of residence throughout the tax year.
 
Individuals unable to identify their primary place of residence will be expected to provide a number of the days they spend in Scotland and elsewhere in the UK to ascertain whether they are a Scottish taxpayer.
 
HMRC insists further guidance will be available at a later date prior to April 1 2016, to assist taxpayers in identifying whether they will be eligible for the new Scottish rates.

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