Opinion Former Article

Chartered Institute of Taxation responds to Scottish Budget

Commenting on the Scottish Government’s income tax proposals for 2019/2020, Moira Kelly, chair of the CIOT’s Scottish technical committee said:

“The income tax changes proposed by the Scottish Government will mean that from next April, based on our initial calculations, Scottish taxpayers earning more than £26,990 per year will pay more in tax than their peers south of the border1.

“Scottish taxpayers will continue to pay the higher rate of income tax once they reach earned income of over £43,430, as is the case for the current tax year, as a result of the decision to freeze the higher rate threshold.

“These changes also mean that for those in receipt of certain types of in-work benefits, such as Universal Credit, the impact of these lower tax bills will be less than the £20 per year suggested by the Scottish Government. This is because of the ‘taper rate’ – which reduces the amount of benefit received for every £1 of extra income earned.

“For every extra pound gained in reduced income tax, they will lose 63p in Universal Credit, meaning that they will only benefit to the tune of £7.40 per year.

“The decision to freeze the higher rate threshold is unlikely to result in a rush to mitigate the higher rates of Scottish tax – for example by relocating to other parts of the UK or choosing to incorporate a business in order to benefit from lower rates of UK corporation and dividend tax.

“But they do lend themselves to a growing perception that Scotland is taking a different tax tack to the rest of the country, particularly as the UK income tax regime moves in the opposite direction”.

Notes for editors:

1. The Chartered Institute of Taxation’s initial analysis of the figures published by the Scottish Government suggests the following differences in the liabilities of Scottish and UK taxpayers from next April are as follows:
Those earning less than around £26,990 will pay less income tax in 2019/20 than equivalent earners in the rest of the UK.

2. The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 18,400 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact:  Chris Young, Scotland External Relations Officer, 07900 241 584; cyoung@ciot.org.uk

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