Scottish Income Tax Changes 2021

Income tax is the responsibility of the UK Government and is collected and managed by HMRC.

However, the Scotland Act 2012 gave the Scottish Parliament the power to set a different rate of income tax in Scotland, known as the Scottish Rate of Income Tax (SRIT). This took effect from 6 April 2016.

Scotland Act 2016 extended these powers, enabling the Scottish Parliament to set the tax band thresholds (excluding the personal allowance) as well as the rates. This applies to all non-savings, non-dividend income of Scottish taxpayers, and took effect from 6 April 2017.

Income tax is not a devolved tax. HMRC continues to be responsible for the collection and management of income tax in Scotland, which includes the identification of Scottish taxpayers. The Scottish Income Tax collected by HMRC is paid to the Scottish Government.

The following changes have been proposed in the budget 2021 statement from Kate Forbes, applicable for the 2021/2022 tax year.

As a result, all Scottish taxpayers will pay slightly less Income Tax in 2021-22 than in 2020-21, based on their current income. Furthermore, based on our assumptions about the UK Budget on 3 March 2021, 54% of Scottish taxpayers will continue to pay less tax than if they lived in other parts of the UK in 2021-22. At a time when people across our country are dealing with the economic and social impacts brought on by the pandemic, this policy delivers the certainty and stability they need from the tax system.

When will the changes be applied?

At 16.15 28th January 2021 – HMRC confirmed that the changes are effective from Tuesday 6th April 2021. They have also confirmed the UK and Welsh changes which match the predictions provided by PAYadvice.UK and those will also be effective from 6th April 2021.

HMRC do state that once all rates and threshold have been approved by respective administrations, HMRC may need to carry out a later recoding exercise to include any relevant changes.

PAYadvice.UK 28/1/2021 updated 20/2/2021

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