Plans to restructure Scottish income tax will introduce additional complexities for Scottish taxpayers and the measures should not be considered in isolation from the wider UK tax and benefits regime, warns Moira Kelly, chair of the CIOT Scottish technical committee
This follows the publication (14 December) of the Scottish government’s draft budget for 2018/19.
The proposals could see some middle-income earners paying a higher marginal rate of tax and national insurance contributions (NIC) than those on higher incomes because of the misalignment between income tax and the upper earnings limit (UEL) of NICs.
The upper earnings limit for NIC is aligned with the UK higher rate threshold for income tax, which is £45,000, higher than Scotland’s at £43,000 in 2017/18. The rate of Class 1 NIC between the primary threshold and upper earnings limit is 12%, and is paid at 2% above the upper earnings limit.
The decision to introduce a new ‘starter’ rate of tax could pose complications for some people in receipt of benefits, while noting that the creation of an ‘intermediate’ rate could have implications for people in receipt of the UK-wide marriage allowance.
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