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New Scottish tax & marriage allowance.

By 67 votes to 50, Holyrood (Scottish Parliament) has a new income tax regime.

It is more complicated than the rest of the UK in that it has four extra rates and three new thresholds.

(SRIT = “Scottish Rate of Income Tax”)

On closer examination, there is one of the minor unintended consequences.

Marriage Allowance.

From April 2018, in the rest of the UK, the marriage allowance is worth £238 for the higher earning spouse. Marriage allowance will be a less valuable tax break in Scotland. The lowest Scottish tax rate will be 19 per cent. The £1,190 transferred would mean a gain to a Scottish taxpayer of 19 per cent of that amount, namely £226.10. That is £11.90 less than the amount saved by those living in the rest of the UK.

Also, the allowance will not be paid to those where one spouse has an income above £43,430 where the new Scottish higher rate tax will begin. Yet for the rest of the UK, this threshold moves up to £46,350 from April 2018.

Wales

From April 2019, the Welsh government will get its own right to set tax rates, although it won’t be able to tinker with tax thresholds. No doubt, this will come later.

Remember, we are about to move to an MTD system (Making Tax Digital). The UK tax system is getting increasingly complex, rather than simpler.