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Scottish rate of income tax: HMRC guidance

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HMRC has published the text of a Memorandum of Understanding between HMRC and the Scottish government on implementation of the Scottish rate of income tax.

Scotland Act 2012 gives the Scottish parliament power to set a Scottish rate of income tax to be charged on Scottish taxpayers. The rate is expected to apply to non-savings income from April 2016.

The Scottish rate will be added to each of the main UK rate bands ‘after ten pence in the pound has been deducted from each rate’, HMRC said. For example, if the Scottish parliament sets a rate of 9% the Scottish basic rate will be 19%. If it sets a rate of 11%, the Scottish basic rate will be 21%.

The Scottish rate affect will affect everyone who is a Scottish taxpayer. ‘Broadly, if you live in Scotland you are a Scottish taxpayer,’ HMRC said. All Scottish taxpayers in PAYE will receive a tax code beginning with the letter S. Employers across the UK will be required to upgrade their systems accordingly.

The Memorandum of Understanding and a series of questions and answers are available on the HMRC website. Guidance is also available on the Scottish government website.