Clarifying the Scope of Scottish Income Tax Powers

30 November 2016


The further income tax powers in Scotland Act 2016 provide the Scottish Parliament with full freedom to set the income tax rates and limits applicable to Scottish taxpayers on their non-savings and non-dividend income. This power will commence from 6 April 2017.

The Scottish Government will announce its proposed rates and limits for the 2017-18 tax year in their draft budget on 15 December 2016; watch the CIPP news page for details.

A Technical Note has been published maintains existing policy and builds on related legislative amendments already in place (to accommodate the Scottish rate of income tax), to clarify:

  • the manner in which the further income tax powers, devolved by Scotland Act 2016, interact with other areas of the income tax system; and
  • the resulting consequential changes to legislation that are required to achieve this.

Scottish income tax powers have implications for a number of areas of income tax, particularly those which reference specific rates of income tax, the vast majority of which are to references to basic rate.

The Scotland Act 2016 requires the Scottish Parliament to maintain a Scottish basic rate and all areas of income tax legislation which reference basic rate have already been amended, to include Scottish basic rate, to facilitate the Scottish rate of income tax. No further consequential amendment is therefore required to accommodate the Scotland Act 2016.

The remaining areas of income tax for which further Scottish income tax powers have implications are mainly therefore those which reference rates of tax other than the basic rate. In such cases consequential amendment is required to ensure the continuing unchanged operation of such areas (for example, gift aid and relief at source pensions) should the Scottish Parliament choose to move away from the basic, higher, additional rate band structure that currently applies in the UK.

Regulations giving effect to these consequential amendments will be made prior to the start of the 2017/18 tax year. A draft of these regulations ‘Scotland Act 2016 (Income Tax Consequential Amendments) Regulations 2016’ is contained in the Technical Note.

If you have any comments on the Technical Note or the draft consequential amendments, please send these by 31 December 2016 to:

Simon Moulden

Room 1/C20

100 Parliament Street

London SW1A 2BQ

[email protected]