Pension saving may soften triple whammy for higher rate Scottish taxpayers with salary sacrifice reducing tax liability while higher pension contributions can offset higher rate child benefit clawback, explains Kay Ingram, director of public policy at LEBC Group
In his second Budget, Scottish Finance Secretary, Derek McKay, announced inflationary increases in the income tax bands for starter, intermediate and basic rate Scottish taxpayers but not for higher or top rate taxpayers, who now face a triple whammy of:
- a rate of tax 1% higher than the rest of the UK;
- a higher rate threshold to become £6,570 lower; and
- 10% extra national insurance contributions on earnings between £46,350 and £50,000.
Differences in income tax across the UK arises due to the Scottish government having devolved powers to set income tax rates and bands, while allowances and national insurance (NI) thresholds and rates are set at Westminster for the whole of the UK.
Scottish income tax is payable by those with a main residence in Scotland, tested on the basis of where they spend their time and tests such as the address of the GP, bank accounts and motor insurance.
