There are many benefits to moving to Scotland for work or retirement, especially the stunning scenery. However, anyone contemplating a move should consider the tax cost of relocating from elsewhere in the UK.
The Scottish Parliament has set income tax rates and bands since April 2017, with the result that most Scottish taxpayers have generally faced a higher tax burden than other UK taxpayers. This cost is set to get even wider from April 2024.
The main difference between Scottish tax rates and those applicable to the rest of the UK is going to be Scotland’s new advanced rate of 45% which, from April 2024, will apply on income between £75,000 and £125,140. This is 5% higher than is payable on equivalent income in other parts of the UK.
Given that the personal allowance is tapered away where income is between £100,000 and £125,140, this will mean a marginal rate of 67.5% on this band of income: it is 60% in other parts of the UK. Once income hits £125,140, the Scottish top rate is 48% compared to the rest of the UK's 45% additional rate.
The Scottish tax system generally hits harder at the higher end of the pay scale. Someone moving to Scotland after April with an income of £40,000 will see their annual tax bill go up by just over £110. However, it is nearly £3,350 more with an income of £100,000, and almost £6,000 where income is £150,000.
At the lower end of the scale, a pensioner moving to Scotland with an income of, say, £25,000, will actually see a modest reduction in their tax liability.
Having one home in Scotland and living there will make you a Scottish taxpayer, but also if:
The government has published a guide to income tax in Scotland on its website.
Companies House is introducing wide-ranging reforms – subject to new legislation being in place – from 4 March 2024. Directors need to get ready for the first tranche of measures.
The reforms are being introduced with the aim of clamping down on financial crime and improving corporate transparency and form part of the recently enacted Economic Crime and Corporate Transparency (ECCT) Act. The changes will particularly impact when incorporating a new company, but existing companies are also affected.
The use of a PO box as a registered office will no longer be permitted. A registered office must be an address where the receipt of documents can be recorded by an acknowledgement of delivery. This means that a third-party agent’s address should still be suitable.
Directors should make sure that any existing company using a PO box as a registered address has made a change by 4 March 2024. This can be done online at the Companies House website.
Any company without an appropriate registered office address risks being struck off the Companies House register.
When a company is incorporated from 4 March 2024, it will be a requirement to provide a registered email address for Companies House. The same email address can be used for more than one company:
In future, the subscribers (shareholders) will need to confirm they are forming a new company for a lawful purpose.
For existing companies, confirmation statements filed from 4 March 2024 will include a declaration that a company’s future activities will be lawful. Companies House may take action if it receives information that a company is not operating lawfully.
Other changes are in the pipeline, in particular, mandatory identity checks for company officers will be introduced later in 2024. Details of the changes being introduced by The ECCT Act can be found on the government website.
Having already paid out over £1 billion in equal pay claims, and now facing claims for further millions, Birmingham City Council’s financial crisis is a stark reminder of why it is so important to get equal pay right.
All employers will undoubtably know the basic principle that men and women must receive equal pay for doing equal work. However, it is possible for employers to be caught out by some complications of the rules:
Where equal pay rules become less black and white is in the arena of equal work. This is where Birmingham City Council came unstuck. The original dispute in 2012 arose because bonuses given to staff in traditionally male-dominated roles discriminated against female workers working in roles such as cleaners, teaching assistants and catering staff.
Comparisons are not necessarily on an exact like-for-like basis. It might be that the level of skill, responsibility and effort needed to do work are equivalent, or work might simply be of equal value, even if the roles seem different, such as comparing warehouse and clerical jobs.
Differences in pay
Although differences in pay terms and conditions are permitted, this must have nothing to do with gender identity. For example, someone in a similar role could be paid more if they are better qualified or are employed in a location where recruitment is difficult.
One way for employers to avoid equal pay disputes is to be transparent in regard to pay and grading systems. Job descriptions should be up-to-date and accurate.
The Advisory, Conciliation and Arbitration Service (Acas) has published guidance for employers on equal pay on its website.
For employees, the national insurance cut announced in the Autumn Statement took effect on 6 January.
For many years, successive governments have been happy for the public to vaguely believe that national insurance contributions (NICs) are building up in some national benefit fund, rather than representing just another tax on income. While something called the National Insurance Fund does exist, as a House of Commons Library briefing noted back in 2019, “The Fund operates on a ‘pay as you go’ basis; broadly speaking, this year’s contributions pay for this year’s benefits.”
For politicians, the perceived difference between NICs and income tax made it possible to grab the headlines by reducing the basic rate of tax while receiving much less attention for maintaining or even increasing revenue by raising NICs.
Last November, the Chancellor appeared to have finally given up on the distinction-without-a-difference approach by proclaiming that his cuts to NICs for employees and the self-employed were tax cuts.
If you are an employee (but not a director, to whom special rules apply), the cut means your main NIC rate (on annual earnings between £12,570 and £50,270) fell from 12% to 10% from 6 January 2024. The extra amount in your pay packet is broadly the same as if a 2p cut had been made to basic rate tax (which covers the same £37,700 band of income). However, from the Chancellor’s viewpoint, the NICs cut was cheaper, as there was no ‘tax cut’ on pension or investment income, both of which are NIC-free.
The employer’s NIC rate did not change, remaining at 13.8% on all earnings above £9,100. If your earnings are below £50,270, the theoretical advantage of using salary sacrifice to pay pension contributions has been marginally reduced but remains attractive, as shown in the table below, based on a £1,000 sacrifice.
If you are among the growing band of higher or additional rate taxpayers, the financial advantage of salary sacrifice is unaltered. Either way, if you are not using salary sacrifice to pay pension contributions, it is still worth taking advice about the option. It is beneficial in most circumstances, but there are drawbacks to be aware of.
The media storm surrounding HMRC taxing eBay and other online sellers from the start of 2024 was, in fact, itself counterfeit goods.
A crop of stories across social and traditional media swirled across the start of the new year about HMRC cracking down on ‘side hustle’ tax from 1 January, leaving sellers using sites like eBay and Vinted feeling uncertain. Coming after an early December announcement that HMRC had effectively closed its main self-assessment helpline until 1 February 2024, the story only fuelled the outrage directed at the Revenue.
Except that it was not fresh news or, even, news at all. There was no new ‘side hustle’ tax. HMRC was starting the first year in which digital platforms, such as eBay, would be required to automatically report details of sellers who in a calendar year:
Contrary to fears raised online in the New Year, neither HMRC nor the OECD have any interest in the sale of personal items no longer required, whether clothing or mobile phones. The new reporting requirements are for people who are trading – buying and selling goods with the aim of making a profit, something that has always been taxable.
It is worth bearing in mind that there is also a little-known trading allowance, which exempts from tax £1,000 of trading income (before expenses) in a tax year. A similar £1,000 allowance applies to property income (also before expenses), which matters here because Airbnb falls within the scope of the reporting regime.
There are a couple of lessons to learn from this saga of the ‘side hustle’ tax. The first is that tax is rarely simple and media information – especially social media – can be misinformation. The second is that HMRC’s ability to gain insight into your sources of income is ever-expanding.
You have been warned…
The government has published information on who may be affected by the advent of reporting rules for digital platforms,
With tax bands and other thresholds frozen, taxpayers should be aware of the implications of their income increasing. Increased income can mean more than facing a higher tax bill.
Higher rate taxpayers need to look at which allowances, reliefs or benefits are no longer claimable and those which are now worth claiming.
Pension contributions are more attractive once relief is at a higher rate than just the 20% basic rate. Contributions make even more sense if entitlement to marriage allowance, child benefit or childcare is preserved. Given that the personal allowance starts to be tapered away at the same point that tax-free childcare is lost, the overall cost of pension contributions where income just exceeds £100,000 can be negligible.
Aside from the increased rate of tax when income crosses a threshold, the savings allowance is cut in half to £500 for higher rate taxpayers. This is lost altogether once income reaches £125,140. Tax on savings can therefore increase despite the amount of savings income not changing. Investing in Individual Savings Accounts (ISAs) can mitigate the problem, as can pension contributions particularly if income is above the £50,270 threshold.
There are different childcare schemes in Scotland, Wales and Northern Ireland, and Scottish tax rates and thresholds differ.
For information on tax relief for private pension contributions visit the government website.
The outcome from the Making Tax Digital (MTD) small business review is that MTD for income tax self-assessment (ITSA) will not be extended to those earning under £30,000 for the foreseeable future.
MTD ITSA for the self-employed and landlords is to be introduced from April 2026, with the initial mandate applying to those with income over £50,000. Those with income between £30,000 and £50,000 are set to join from April 2027.
The government said it would review the needs of smaller businesses – those with income under the £30,000 threshold – before extending MTD further. The latest announcement means there will be no extension, although the decision will be kept under review.
There is no set mandation date for general partnerships (those with individuals), non-general partnerships (those with a corporate partner) and limited liability partnerships.
An important point to note is that the £30,000 and £50,000 limits apply to total self-employment and property income, and not to the profits actually made.
Some reporting changes have also been announced:
· Year-end reporting was originally going to consist of two separate steps – an end of period statement and a final declaration. This would have caused considerable confusion, so there will now be just the one final declaration; and
· Quarterly reports are now to be cumulative, so any errors will simply be corrected on the next report – rather than the previous requirement to resubmit past quarters.
Despite the latest attempt to simplify the MTD process, there are still concerns that HMRC has simply lost sight of the needs of taxpayers. A recent House of Commons committee report criticised the project’s spiralling costs, design flaws and missed deadlines.
The report recommends HMRC research what business taxpayers would actually find most helpful, and to take into account the substantial costs of implementing MTD.
HMRC’s guide to using MTD ITSA can be found here.
If enacted in its current form, the recently published Leasehold and Freehold Reform Bill will affect landlords in England and Wales who own a leasehold property.
Extending a lease
The government’s intention is that the standard term given when extending a lease will be 990 years. The extension term for flats and apartments is currently 90 years.
The initial lease term for leasehold property could be just 99 years. For a new landlord, this might seem fine, but it is generally not a good idea to let a lease run down until there is less than 80 years remaining. Not only will it (currently) be more expensive to extend, but such a property could be difficult to sell or remortgage.
There are various other changes, with two of the more important being:
· The reduction of ground rent to a peppercorn (virtually zero) upon payment of a premium.
· The removal of the ‘marriage value’, which can make it more expensive to extend a lease where the lease term has run down. The marriage value reflects the additional market value of having a longer lease. Currently, there is only certainty of avoiding marriage value if a lease has more than 80 years to run.
Ground rent is of particular concern if it doubles every ten years or at more frequent intervals.
More detail will now be required when advertising property, regardless of whether it is let privately or via an agent. Many landlords and agents will already provide much of the mandatory information, but landlords letting privately might overlook such items as:
· Details of the property’s utilities, or lack of;
· Available parking;
· Issues with mobile coverage;
· Flood risk; and
· Accessibility facilities.
These new measures will now give prospective tenants as much information as possible prior to viewing.
A quick guide for landlords advertising a property can be found here.
Changes to individual savings account (ISA) rules coming into effect from 6 April 2024 will make ISAs more user friendly, most notably the move to allow multiple subscriptions of same-type ISAs in a tax year.
It is currently only possible to pay into just one ISA of each type in a tax year. Multiple subscriptions will mean:
· Cash savers will be able to open new cash ISAs if better deals become available. Greater flexibility will mean some funds could go into a fixed-rate deal, with a reserve held in an easy-access cash ISA.
· Investors will be able to spread their investments over several different providers. For example, one stocks and shares ISA might be used for longer-term investments, with another – offering low dealing costs – used where regular trades are made.
For 2024/25, the annual £20,000 ISA contribution limit will not see any change, with the £9,000 Junior ISA and £4,000 Lifetime ISA limits also frozen.
Although details are still to be announced, the government’s intention is that in future it will be possible to hold fractional share contracts within a stocks and shares ISA. Under existing rules, at least one full share must be held, even though the shares of some US tech companies can cost hundreds.
Other changes to be introduced from April 2024 include:
· Partial transfers between ISA providers will be possible during the tax year. For example, if £15,000 has been paid into a cash ISA since 6 April, £5,000 could be moved to a different provider. Currently, the whole £15,000 would have to be moved.
· The minimum account-opening age for cash ISAs is to be harmonised at 18. It will therefore no longer be possible for 16- and 17-year-olds to open a cash ISA – just a Junior cash ISA where the investment limit is somewhat lower.
Any 16- and 17-year-olds without a cash ISA might want to open one while they still can – by 5 April 2024 at the latest.
Although not yet updated to the 2024/25 tax year, HMRC’s basic guide to ISAs can be found here.
November’s Autumn Statement included a package of measures to help alleviate the burden of business rates in England and on the Scottish islands, but Wales won’t be so fortunate.
75% relief rules
Retail, hospitality and leisure properties that do not qualify for small business rates relief currently receive a 75% business rates discount, subject to a cap of £110,000 for each business. This relief is to continue throughout 2024/25.
Property will typically qualify for relief if the business is mainly being used as a:
· Restaurant, café, bar or pub;
· Cinema or music venue; or
· Gym, spa or hotel.
There is an equivalent scheme for Welsh retail, hospitality and leisure property, but for 2024/25 the discount has been reduced to 40%. There is no equivalent relief for Scottish or Northern Irish business property. However, Scotland has announced a new 100% relief for hospitality businesses situated on the Scottish islands.
A business rates bill consists of a property’s rateable value multiplied by a multiplier (or poundage). For 2024/25, the small business multiplier (rateable value below £51,000) is again frozen at 49.9p. However, the standard multiplier (rateable value over £51,000 or more) is being uprated by 6.7% to 54.6p.
Given inflation has now dropped to 3.9% (November 2023), the 6.7% increase for the standard multiplier is not going to be favourably received.
· Scotland: The basic multiplier has been frozen, but higher value properties will see poundage increased by 6.7%.
· Wales: The multiplier will see an across-the-board increase of 5%. This will be painful for smaller businesses, especially as the Welsh multiplier at 56.2p is the highest in the UK.
· Northern Ireland: No announcement as yet, and, in any case, rate poundage varies across council areas.