New laws that let the Scottish Parliament raise income tax may net unwitting expats moving north of the border.
The Scotland Act 2012 will see a proportion of the tax paid in the country going into a special fund for spending by the Scottish Parliament.
The new tax rates have yet to be decided but everyone living in Scotland will be subject to paying them.
If the Scots decide to levy a rate which is more than the UK rate there will be no escaping the tax since it will still be collected by HM Revenue and Customs at source.
There will be no exemptions particularly if expat workers try to declare that they do not have to pay.
The law for setting income tax rates takes effect from April 2016.
Rates mirror England
However, it should be noted that the Scottish Parliament may yet decide to set a rate lower than the UK rate which could lead to an economic boom as firms move in to take a tax advantage.
The new rates will effectively mirror the UK tax rates and will go up or down relative to the rate set by the Parliament sitting in London.
For instance, if the Scots decide to set a rate of 10%, that would be the same tax rate for all taxpayers in the UK.
If the Scottish parliament opted for a rate of 9% the country’s basic rate would be 19%, its higher rates would be 39% and the additional rate would be 44% – that is assuming that the UK rates do not change between now and 2016.
Obviously, if a figure higher than 10% was chosen by the Scottish then their tax rates would be higher than anywhere else in the UK.
How the tax works
A rate of 11% set by the Scottish Parliament would see the Scottish basic rate being 21%, for instance.
There are already fears that the new tax rates will apply to all Scots everywhere – much like the American tax system compels US citizens to pay tax no matter where they live in the world.
The new law makes the distinction that those living in Scotland, whether they are Scottish or not, will pay the new tax while those Scots living in other parts of the UK will not.
One interesting scenario is for the Scottish Parliament to set a lower tax rate than the UK’s which could see those Scots who work outside of Scotland earning more than their colleagues.
For anyone who is confused about the new set-up, they will be contacted nearer the time by HMRC to confirm that they are Scottish taxpayers.
