MSP’s can’t rule out the prospect of making further changes to income tax before the start of the new tax year, despite today’s vote to approve Scotland’s proposed income tax regime for 2020/21.
The Chartered Institute of Taxation (CIOT) said that this was because there remains the possibility that tax changes in next week’s UK Budget could prompt Scottish Ministers to revisit their tax plans before the start of the new tax year on April 61.
It is a situation that has been previously acknowledged by both Ministers and independent researchers in the Scottish Parliament2.
In previous years, the Scottish Parliament’s tax and spending plans have been approved after the UK Budget. The process was reversed this year because the UK Budget – originally planned for November – was postponed due to the December General Election.
It means that MSPs have had to set a Budget without sight of UK tax policy proposals.
Alexander Garden, chair of the Chartered Institute of Taxation’s Scottish Technical Committee, said:
“In any other year, today’s vote would mark the point that rates and bands of Scottish income tax are settled for the coming year.
“But because we are still waiting on the UK Budget, we cannot definitively rule out the possibility that changes to UK income tax policy – such as cutting tax rates or raising tax thresholds – could create a situation where Ministers feel that they have to revisit Scotland’s income tax policy with just days to go before the start of the new tax year.
“The chances of this happening may be minimal, but the fact that we are even contemplating such a scenario exposes once again the unprecedented level of uncertainty that has become the hallmark of this year’s Scottish Budget process”.
Notes for editors
1. The Conservative election manifesto promised no increases in income tax and National Insurance in the lifetime of the current UK Parliament. Last weekend, it was reported that former chancellor Sajid Javid had been proposing a reduction in the basic rate of income tax from 20p to 18p in the forthcoming UK Budget, before his resignation. Such a move, if enacted by his successor, Rishi Sunak, next week would result in Scottish taxpayers paying more overall than their UK counterparts, unless the Scottish Government responded with last minute changes of its own. While it may be politically attractive to follow suit, such a move could reduce the amount of money raised in devolved income tax.
2. Last summer, Boris Johnson proposed increasing the higher rate threshold for income tax from £50,000 to £80,000, a move former Scottish finance secretary Derek Mackay said could result in a ‘turning point’ in the Scottish Government’s approach to tax policy – see Mackay hints at tax change if divergence hits ‘turning point’.
In a briefing on the Scottish Budget proposals for 2020/2021, researchers from the Scottish Parliament Information Centre noted that: ‘if the Scottish Government feels it needs to respond to the UK policy position on income tax after the Budget Bill is passed, it can propose that the (Scottish Rate Resolution) SRR is cancelled and propose a new one, provided it is done before the start of the tax year (i.e. before 6 April)’.
3. A picture of Alexander Garden can be downloaded via the following link.
4. The Chartered Institute of Taxation
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 19,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
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