Scots income tax rings up £35m implementation costs

26 Nov 15

Implementing the Scottish Rate of Income Tax (SRIT) will cost up to £35m and 2.6 million people will be liable to pay it, the National Audit Office has revealed.

The watchdog today published a report examining the steps that have been taken to prepare for devolution of income tax powers to Scotland, which take effect from April 2016.

Under SRIT, HM Revenue & Customs will reduce the basic, higher and additional rates of income tax by 10p in the pound. The Scottish Parliament will then levy SRIT at an equal rate across all three bands. Assuming SRIT is initially set to 10p, Scottish workers will see no change in the amount deducted from wages.

HMRC will remain responsible for collecting all income tax due, but will hand over the appropriate proportion to Scotland.

Scottish taxpayers are due to start being notified of the change next month.

The actual SRIT level that will apply for the 2016/17 tax year has yet to be announced and the NAO said this delay “leaves an increasingly narrow timeframe” for HMRC to react to responses from taxpayers and refine its data.

The NAO’s report also stressed the importance of maintaining accurate address records, as residence is the prime means of determining whether someone should be paying SRIT or not.

“The possibility of a different income tax rate for Scotland and the rest of the UK for the first time means individuals could pay the incorrect rate of income tax if the address held by HMRC is incorrect. Address information can only be updated if taxpayers inform HMRC of a change of address,” it stated.

“HMRC has engaged with employers and other stakeholders to encourage this. However, actively ensuring taxpayers keep HMRC informed of their correct address remains a key challenge to HMRC’s objective of recovering the correct amount of income tax from Scottish taxpayers.”

Elsewhere, the report praised the preparation done by HMRC. Governance and scrutiny was found to be sound, the compliance strategy was both clear and detailed, and risks and costs to IT and administrative systems had been minimised, the NAO concluded.

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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