Smooth implementation of Scottish income tax critical for business

Posted On: 
14th December 2017

Cara Heaney, EY Partner and Head of People Advisory Services in Scotland, comments on Scottish Income Tax:

“Following the surprise introduction of a new Scottish starter rate in the Scottish Budget today, Scotland is now the lowest taxed location in the UK for people earning less than £26,000. For those who will see a tax increase, other factors such as the overall cost of living, level of public services and quality of life continue to play an important part in making Scotland an attractive place to live and work.

“Most significantly, higher rate taxpayers will now pay 41%. However, the Scottish Budget announcement stopped short of raising the rate for additional rate taxpayers to 50% and instead went for 46%. With the levers at his disposal, this middle ground measure aims to both meet the objectives of raising revenue, while taking into account concerns around Scotland’s competitiveness and ability to attract and retain talent.  

“Introduction of the new 21% band and the increases to the existing higher and additional rates will further increase the differential paid by mid to higher earners in Scotland compared with their counterparts in the rest of the UK. It will also create greater differentiation in the two systems, HMRC and payroll providers will have a fairly tight schedule to implement the new five band system after Parliamentary ratification in the New Year.

“From the perspective of the employer their priority is likely to continue to be access to talent, certainty of the direction of travel of future tax policy and ease of administration. Minimising any administrative burden on the employer should be a critical consideration.”