With the advent of the new tax year last month, the tax system in the UK once again got a whole lot more complicated. The devolved Scottish government enacted, for the first time, its income tax varying powers, as given in the Scotland Act 1998. This power means that they can vary income tax levels by up to three pence in the pound.
The rest of the UK maintains the ‘traditional’ bands of income tax of 20% Basic Rate, 40% Higher Rate and the 45% Additional rate. Scotland now has FIVE separate bands; 19% Starter Rate, 20% Basic Rate, 21% Intermediate Rate, 41% Higher Rate and a Top Rate of 46%.
As you can imagine this has caused quite a few headaches for all concerned at HMRC – especially when you consider certain tax reliefs such as Marriage Allowance relief.
With Marriage Allowance Relief, if both are Basic Rate payers, 10% of own personal allowance can be transferred to their partner. In many cases this helped couples reduce their tax bill by £230 for 2017/18. But what happens with married couples or those in a civil partnership north of the border?
Well, as many would no longer be classified as Basic Rate payers it would’ve meant that, according to the letter of the law, they would’ve missed out on the relief. A deal had to be struck between Westminster and Holyrood to expand the relief to all those who are not Higher or Additional/Top Rate payers.