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A SRIT idea

Will Scottish taxpayers pay less?

From 5th April 2016 a new Scottish Rate of Income Tax (SRIT) will come into force in Scotland.  Although is it currently anticipated that taxpayers in Scotland and the rest of the UK will pay the same rate of tax next year, it is likely that the regions will diverge in coming years as more power is devolved to Scotland.

Who is Scottish?

The criteria applied to determine Scottish taxpayers are based on where the individual lives, and not where they work or their feeling of national identity.  All of the following would be classed as a Scottish taxpayer:

  • WILLIES (Working In London Living In Edinburgh)
  • Scottish Parliamentarians (regardless of where they live)
  • People living and working in Scotland
  • People living in Scotland and working across the border in Carlisle  / Newcastle etc

Who decides?

HMRC are responsible for assessing whether or not someone is a Scottish taxpayer.  Anyone that HMRC deems to be Scottish based on their principal residence will be issued with a new S tax code.  Your payroll software should automatically process the SRIT for anyone with a new S code.  As with student loans, it is not for the employer to use their own judgement about applying the SRIT.  If an employee disagrees with their tax code, it for the employee to resolve this with HMRC.  Employers must act on instructions from HMRC.

Do English employers need to do anything?

Even if your business operates exclusively in England (or any other region of the UK outside Scotland) you will need to comply with regulations as they apply to any of your employees who live in Scotland.  Surprisingly, there is no legal obligation to inform HMRC if you move and although employers really ought to know where their employees live, it might not always be obvious, especially if an employee has more than one residence.

Common misconceptions

It is common to think that any of the criteria below qualify for Scottish taxpayer status, but it isn’t the case.

  • National identity
  • Place of work
  • Where income is generated (eg property income in Scotland)
  • Regular travel to Scotland

Will Scots benefit?

The costs of the SRIT are to be borne by the Scottish Government.  HMRC currently estimates that the total costs of implementing SRIT will be in the range of £30 million to £35 million over the seven-year period from 2012-13 to 2018-19.  This is split between IT expenditure of between £10 million and £15 million, and non-IT expenditure of £20 million.  The additional annual costs of operating the SRIT will be between £2m and £6m.  The lower estimate corresponds to a SRIT where Scots pay the same rate as the rest of the UK.  If the SRIT diverges from the neutral rate of 10%, the costs rise in administering the tax regime in the UK including pensions, gift aid and disputes over residence.

Why is the SRIT being introduced?

Scotland as a whole is likely to be worse off as any difference in tax raised is offset by an adjustment to the block grant from Westminster.  It is estimated that 2.6m people will be issued with an S tax code.  The annual running costs are therefore less that £3 per taxpayer but it is a valid question to ask if it is a good use of taxpayer’s money if tax rates are the same across the UK.  It is anticipated that after additional powers are introduced in 2017 the SRIT could be more progressive, meaning that wealthier individuals would pay a higher proportion of tax.  For anyone thinking about their residence status and still had a choice, now is a good time to get advice on the best situation for you!

More information

For more information on the SRIT and for guidance on operating your payroll scheme, please contact Alterledger.

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Trainee Accountant Vacancy

We are pleased to announce that another job opportunity at Alterledger has opened up for a Trainee Accountant.
Top Rated certificate for accountant Tim Alter of Alterledger Ltd, Glasgow

Training for Chartered Management Accountant

If you have graduated in the last year and are looking for your first job after university there are some fantastic opportunities in Glasgow including a position at Alterledger as Trainee Accountant.

 

Alterledger moved to Legal House

New office for Alterledger

Alterledger has been growing consistently over the last few years and the time has come to move into new office premises.  Alterledger is now based at Legal House, 101 Gorbals Street, Glasgow G9 5DW
Top Rated certificate for accountant Tim Alter of Alterledger Ltd, Glasgow

Growing the business and the team

We are pleased to announce that Graham has joined the team as Trainee Accountant and will be working through his ACCA qualifiation.  For more information, please visit the Alterledger website.

 

Pension annual allowance

Carrying forward unused pension annual allowance

Money that you pay into a UK registered pension scheme or qualifying pension scheme receives tax relief.  Personal pension contributions are paid from your earnings after tax and the pension provider reclaims the 20% tax suffered.  All employers will soon be required to offer pension schemes to employees, so now is a good time to think about what you can contribute to your pension scheme.

Anyone can make (gross) contributions each year of £3,600, but above this threshold the maximum you can put into the fund is 100% of Net Relevant Earnings (NRE).  Tax relief on contributions is only available up to the Annual Allowance (including any Annual Allowance carried forward).

Tax Year 2011/12
£
2012/13
£
2013/14
£
2014/15
£
Annual Allowance 50,000 50,000 50,000 40,000

Carry-forward relief

Any unused annual allowance can be carried forward provided you were a member of a registered pension scheme, or qualifying overseas pension scheme during the year.  The carry-forward relief can be used for any unused allowance from the previous 3 tax years.  Assuming you were a member of  a pension scheme, but didn’t have any contributions (personal or employer’s) in the tax years from 2011-12 up to 2013-/14, it would be possible to have total contributions of £190,000 in 2014/15.

 Net Relevant Earnings

  • Earnings from employment
  • Benefits in kind
  • Self-employed profits as a sole trader
  • Share of profits from a partnership
  • Any profit from furnished holidaylettings
    • Less allowable business expenses

Alterledger can help

Alterledger can explain the tax implication of pension contributions for employers and individuals.  Contact Alterledger or visit the website alterledger.com for more information.
 

Employers and their staging date

Staging Date

A process started in 2012 which means eventually, all UK employers will be obliged to enrol all their eligible employees into a contributory pension scheme, known as Auto Enrolment.  This obligation is already being phased in, starting with the biggest employers.  The commencement date for an employer’s obligation to provide a contributory pension scheme is known as the staging date.

The government has said that no small employers (those with fewer than 50 employees) will be affected before the end of the current Parliament.  The general election will be on 7th May so we are nearly there.  Employers will be able to meet this obligation in any way they choose, but one way will be through a government-sponsored National Employment Savings Trust ( NEST ), a simple, low-cost scheme with very limited fund choice, and initial restrictions on transfers and contribution levels.  NESTs will be operated by the NEST Corporation, a not-for-profit trustee body, and will be regulated by the Pensions Regulator.

Alterledger can help

Alterledger can help you prepare for your staging and manage your auto enrolment process along with your payroll once everything is up and running.  Contact Alterledger or visit the website alterledger.com for more information.
 

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