Do You Employ Any Scottish Nationals? – If So Read This

24 April 2015

A Scottish rate of income tax (yet to be announced) will apply from 6 April 2016, allowing the Scottish Parliament to reduce the basic, higher and additional rates by up to 10% or increase them by any amount without limit. The Scottish rate will be administered by HMRC as part of the UK income tax system.

Employers will need to prepare now and ensure they understand the Scottish rate before it is implemented. Individuals with interests inside and outside Scotland may wish to determine beforehand whether or not they will be treated as Scottish taxpayers. Employers who employ Scottish taxpayers will need to ensure they have adequate arrangements in place to be able to correctly process the P.A.Y.E. for these taxpayers.

By early 2016 we are advised that HMRC will issue P.A.Y.E. ‘S’ codes for 2016-17, identifying employees and pensioners who should be treated as Scottish taxpayers. These S codes will have to be processed correctly by the employer under RTI.

Whether an individual is treated as a Scottish taxpayer in any one year in which they are UK resident will depend on whether or not they meet any one of three conditions. The first two conditions, centre on connections with Scotland or another part of the UK. The third condition relates to an MP, MEP or MSP.

Clearly this is a big change both for Employers and Scottish employees. Employers affected need to take steps to ensure their payroll software deals with this issue.

Green & Co can offer further advice and can also provide payroll services at a competitive price.

Please contact us for additional information if required.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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