Scotland Act 2012

21 January 2015

Information regarding the Scotland Act 2012 has now been moved to GOV.UK and contains a useful FAQ on the Scottish rate of income tax. Draft legislation is due to be published later this month.


The Scotland Act 2012 gives the Scottish Parliament the power to set a Scottish rate of income tax to be administered by HMRC for Scottish taxpayers. It is expected to apply from April 2016.

The Act also fully devolves the power to raise taxes on land transactions and on waste disposal to landfill – it is expected that this will take effect in April 2015, at which point the existing Stamp Duty Land Tax and Landfill Tax will not apply in Scotland and will be replaced with Land and Buildings Transaction Tax and Scottish Landfill Tax.

The act also provides powers for new taxes to be created in Scotland and for additional taxes to be devolved.

For employees and pensioners, the Income Tax change will be applied through PAYE (Pay As You Earn). HMRC will issue tax codes to employers in the months before April 2016 which will identify those employees who are Scottish taxpayers, and employers will deduct tax at the appropriate rates, which may be higher or lower than or the same as those which apply in the rest of the UK.

The definition of a Scottish taxpayer is based on the location of an individual’s main place of residence – further guidance will be available in due course.

CIPP comment

As part of the Stakeholder Group the CIPP policy team continue to be looking at the implementation detail of the Scottish Rate of Income Tax. The next meeting is due to be held in February where, amongst other issues, we will be discussing further HMRC’s requirement that employers show the Scottish rate separately on the P60.

HM Government has also just published a message to stakeholders announcing that draft legislation will be published by Burns Night (25 January) which we will publish when available. The full message can be read through the link below – an excerpt says,

“Since the publication of the Smith Commission report, the UK Government has engaged a wide range of sectors as part of the process of turning the Smith Commission Agreement into draft clauses, including the Stakeholder Group established by the Secretary of State for Scotland to inform the preparation of the draft legislation.”

See our November news item for further detail on the Smith Commission recommendations.

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