Millions of workers who are auto-enrolled into pensions will see deductions from wages increase when they receive their April wage slip. On 6 April 2018, employers must have increased the amount of their minimum contributions into their staff's automatic enrolment pension to at least 2% of qualifying earnings. Staff members will have to make up whatever shortfall remains of the new total minimum contribution up to 5%, including the employer's contribution.

The minimum contribution levels will rise again on 6 April 2019, with the employer paying a minimum of 3% towards the pension, and the total minimum contribution reaching 8% - with the member of staff making up the rest.

Rebecca Goldring, a tax manager at Blick Rothenberg, said: ‘With reports that almost one in eight British individuals set to retire in 2018 will rely solely upon the state pension for income, the government is trying to change the status quo by gently introducing workers’ into saving for their retirement. However, for many this increase will feel like a harsh jolt.

‘The Bank of England forecasts wage growth this year and with a rise in the income tax threshold this should boost spending and put more cash in workers’ pockets. However, the increase in monthly auto-enrolment pension contributions may result in a decrease in take home pay for some workers.’

CIOT is warning that Scottish taxpayers are exposed to more complexity and potential confusion than ever before because of the introduction of new rates and bands of income tax and the need to ensure they continue to receive the correct amount of pension tax relief.

In addition, the institute highlighted the continuing anomaly that will result in some middle-income earners paying a higher marginal rate of tax and National Insurance contributions (NICs) than those on higher incomes.

Moira Kelly, chair of CIOT’s Scottish technical committee, said: ‘By introducing a new 19p starter rate and a new 21p intermediate rate – as well as increasing the higher and top rates of tax – every Scottish taxpayer who gets their income from a salary, a pension, renting a home or profits from self-employment will now be exposed to as many as five different rates and bands of tax.

’Complexity was always going to be the price to pay for having control over parts of the income tax regime. While the differences next year may not be huge, they are noticeable and they expose Scottish taxpayers to increasing levels of complexity and potential confusion than ever before.

‘The misalignment between devolved income tax and UK-wide National Insurance will also result in the anomaly of some middle-income earners paying a higher marginal rate of tax and NI – equivalent to 53% of their income – than some on higher incomes.

‘Things get even more complicated for Scots who also get savings or dividend income. They now face the prospect of having to check both the UK and Scottish rates and bands of income tax to work out what they owe.’

Kelly points out that those paying into their pension under ‘relief at source’ arrangements may be entitled to extra tax relief if they pay income tax at a rate higher than the basic rate, but will need to phone HMRC to ensure that this is included in their tax code or complete a self-assessment tax return at the end of the year.

ACCA is warning that the new tax year sees a key development with child benefit and is urging couples to look closely at the small print of what it describes as ‘confusing and complex’ rules regarding payments to high income earners.

For those earning £50,000 plus, the new tax rules mean they will have to pay back some, or potentially all, of their child benefit in extra income tax, while those earning less than £50,000 will receive the full amount.

Chas Roy-Chowdhury, head of tax at ACCA, said: ‘It is confusing how this is calculated and collected – especially for couples who may not share their income details or tax status – as unusual as this sounds, I’ve heard of instances where couples do not share this information openly.

‘Whoever’s earning the higher amount between £50,000 and £60,000, this policy means they’ll have to declare their tax liability with HMRC – they’ll need to self-assess their liability, so will need to register for tax self-assessment.

HMRC states that “If your partner’s income is also over £50,000 but yours is higher, you’re responsible for paying the tax charge. And “partner” means someone you’re not permanently separated from who you’re married to, in a civil partnership with or living with as if you were.’

Auto enrolment payment details are here.

Scottish government analysis of new income tax regime is here.

High Income Child Benefit Tax Charge is here.

Report by Pat Sweet