HMRC have provided us with an update on the Scottish rate of income tax. And a recent press release confirms that last month HMRC started sending letters to potential Scottish taxpayers as part of the next stage of preparations for its introduction. A detailed briefing explaining the Scottish rate of income tax has also been published.

The National Audit Office recently published its report “The administration of the Scottish Rate of Income Tax 2014–15” which examines HMRC’s progress to date in this area. The report is largely positive saying that the “process for responding to the upcoming Scottish Rate of Income Tax has been thorough”.

The aforementioned update from HMRC reads as follows:–

“The Scottish rate of income tax will come into effect from 6 April 2016. HMRC have provided and will affect all customers living in Scotland, and all employers with employees who live in Scotland.

HMRC will contact customers living in Scotland, where our records show this as their main address, to inform them they have been identified as being a Scottish taxpayer.

What you need to know

Scottish taxpayers will have a tax code prefixed by an ‘S’. Scottish tax codes will be issued as part of the annual coding routines to employers, so the correct rate of income tax can be deducted based on each individual’s taxpayer status.

If any of your clients live in Scotland, their employers must ensure that their payroll software is up to date and able to apply the new ‘S’ codes.

If you represent any employers, you should be aware that they will need to apply the new ‘S’ tax code to all employees identified as being a Scottish taxpayer, even if the rates of Income Tax in Scotland remain the same as the rest of the UK.

There will be no change to the way employers report or make payments for income tax to HMRC, other than applying the ‘S’ tax code to Scottish taxpayer employees.

HMRC will be responsible for identifying whether someone is a Scottish taxpayer using the address information held on our records.

Please encourage your clients to tell HMRC if their address changes, to enable us to correctly identify any Scottish taxpayers and ensure they pay the right amount of tax.

The tax tables will be updated on GOV.UK in February 2016 to show the Scottish Rates of Income Tax for basic, additional and higher rate taxpayers.

You can find updates and all the latest information on the Scottish Rate of Income Tax news page.”

END OF UPDATE