Scottish tax.

[Capt Lightning]

I've just received my 'tax codes' from HM revenue & customs. This indicates the amount we can earn before we start to pay tax. This year there is a significant change because the Scottish government can now collect a portion of the tax and set the rate at which income is taxed. This of course only applies to people who reside in Scotland.

Of course some people think that the rate of tax should be higher to pay for more public service and some say that it could be less to benefit the lower paid etc.. However, the government quite wisely decided not to rock the boat and keep it the same as the rest of the UK.

For most people the tax is collected at source (Pay As You Earn) so we won't notice much change, but salary or pension cheques will show the tax split between Scotland and the rest of the UK.

It might all be different in future.

 

[Ameriscot]

I guess we'll find out our rate when we get home on the 2nd.

 

[Ken N Tx]

What has been your taxes for prior years?? (USD)

 

[Capt Lightning]

Ken, we can earn £11k ($16k) before we pay any tax. We pay 20% tax on all earnings between that and approx £33k ($48k) over that we pay 40% tax. In addition we pay about 12% on our earnings (on the first £33k of earnings only) for national insurance. This pays for state pension, all medical expenses (except dental & glasses), unemployment benefits etc..
(We can take out private medical insurance if we like (and it has advantages), otherwise all medical treatment, and except in England, medicines & eye tests, are free at point of delivery for everyone) State pension in the UK is pretty poor compared to most other countries, so additional private pensions, savings or investments are generally needed.

Now, the tax will be partly set by the Scottish government and part by the UK. We will not see any difference for the present, but the Scottish government could alter both the tax bands and rate. This could cause confusion where a person lived in Scotland, but worked in England - or vice versa.

 

[Ameriscot]

Ken, we can earn £11k ($16k) before we pay any tax. We pay 20% tax on all earnings between that and approx £33k ($48k) over that we pay 40% tax. In addition we pay about 12% on our earnings (on the first £33k of earnings only) for national insurance. This pays for state pension, all medical expenses (except dental & glasses), unemployment benefits etc..
(We can take out private medical insurance if we like (and it has advantages), otherwise all medical treatment, and except in England, medicines & eye tests, are free at point of delivery for everyone) State pension in the UK is pretty poor compared to most other countries, so additional private pensions, savings or investments are generally needed.

Now, the tax will be partly set by the Scottish government and part by the UK. We will not see any difference for the present, but the Scottish government could alter both the tax bands and rate. This could cause confusion where a person lived in Scotland, but worked in England - or vice versa.

My husband's work pension is from England. Education.

 

[Ameriscot]

Ken, the exchange rate can fluctuate a lot so converting to dollars can be misleading. Right now the exchange rate is about 1.40 but I've seen it at $2.00 per pound.

 

[ossian]

Well, I guess we kinda know the answer to some of this now.

The ability to adjust Income Tax in Scotland is a bit of a poisoned chalice. Without greater fiscal autonomy, it is merely a headline grabber. If it was increased to meet greater public spending, it would affect competition with our nearest neighbours. If it was decreased, it would affect public spending without the ability to change revenue contributions from other streams. The UK Government recognises this and it is why they have allowed this control to pass to Scotland. The current proposals by Labour and the Lib Dems in Scotland to increase the tax rates is simply political posturing since they are unlikely to gain control. However........ it should gain them some votes. And the proposal by the Nationalists to reverse the UK plans to increase the higher tax band by £5 - £40k to £45k - is a pretty safe one as there are not that many who fall into this band compared to the SE of England, for example.

Therefore....... I doubt that there will be any radical changes to the Scottish rates compered to the rest of the UK. I think that had Scotland voted to be independent then things would have been quite different. Central and local tax would have been completely overhauled, business and corporate taxes too would also have been shaken up and we would ultimately had a very different tax system from the rest of the UK. However, with the limited powers that we currently have, that can't happen without the risk of making us uncompetitive.

 

[Ameriscot]

Well, I guess we kinda know the answer to some of this now.

The ability to adjust Income Tax in Scotland is a bit of a poisoned chalice. Without greater fiscal autonomy, it is merely a headline grabber. If it was increased to meet greater public spending, it would affect competition with our nearest neighbours. If it was decreased, it would affect public spending without the ability to change revenue contributions from other streams. The UK Government recognises this and it is why they have allowed this control to pass to Scotland. The current proposals by Labour and the Lib Dems in Scotland to increase the tax rates is simply political posturing since they are unlikely to gain control. However........ it should gain them some votes. And the proposal by the Nationalists to reverse the UK plans to increase the higher tax band by £5 - £40k to £45k - is a pretty safe one as there are not that many who fall into this band compared to the SE of England, for example.

Therefore....... I doubt that there will be any radical changes to the Scottish rates compered to the rest of the UK. I think that had Scotland voted to be independent then things would have been quite different. Central and local tax would have been completely overhauled, business and corporate taxes too would also have been shaken up and we would ultimately had a very different tax system from the rest of the UK. However, with the limited powers that we currently have, that can't happen without the risk of making us uncompetitive.

If Scotland had voted to become independent it would have gone into effect tomorrow.