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Ask the expert
Aileen Gates is a partner and Head of Tax at Campbell Dallas.
Email Aileen with your financial queries.
WILL THE NEW SCOTTISH INCOME TAX RATES
AFFECT YOUR PENSION RELIEF?
code. Your status is normally determined by the
location of your main place of residence. This is not
necessarily where you spend the most amount of
time or where you work, but where you have the
closest personal and family connections to.
One of the most widely used tax reliefs is
that obtained from making contributions to
a registered pension scheme. Contributions
qualify for relief on 100% of your annual earnings
up to the annual allowance of £40,000. The
amount of relief depends on how much you
contribute to your scheme and on the rate of
Income Tax you pay. Relief is given either by the
scheme administrator at source, or by employers
via a net pay scheme.
How does relief at source work at the moment?
At present the scheme administrator claims tax
relief at 20% on your contributions and adds this
to your pension. If your income is subject to tax at
the higher or additional rates, you can then make a
further claim for relief on your tax return, this relief
is given by extending your basic and higher rate
limits. If you do not need to complete a return,
relief is given by contacting HMRC to adjust your
PAYE tax code.
If you are a Scottish resident taxpayer the amount
of relief you may claim could be impacted by the
new rates and allowances that are due to apply
from 6 April 2018. This article explains what
these changes mean for individuals who receive
tax relief for pension contributions at source.
How do the two new Scottish rates affect my
relief?
Although the new Scottish starter rate is 19% not
20%, you will continue to get tax relief at 20%
and will not need to repay the difference, you
will be effectively getting more relief than you
actually paid in tax. If you pay the new Scottish
21% intermediate rate, you will be able to obtain
relief for the extra tax paid by claim relief in your
tax return or by contacting HMRC to adjust your
tax code.
What are the new rates?
The tax rates and bands for Scottish taxpayers due
to apply from 6 April 2018 are as follows:
RATE
Starter rate
Basic rate
SCOTLAND
REST OF UK
19%
(£11,850 - £13,850)
20%
20%
(£11,850 -
(£13,851 - £24,000) £46,351)
Intermediate
rate
21%
(£24,001 - £43,430) Higher rate
41%
(£43,431-
£150,000) Additional
rate 46% 45%
(Over £150,000) (Over £150,000)
Can Scottish higher rate and additional rate
taxpayers claim relief for the 41% and 46% rates?
Yes, if your marginal tax rate is 41% or 46% you can
claim relief for the full amount of tax paid on your
tax return or through your tax code.
40%
(£46,351 -
£150,000)
I make my pension contributions to a net pay
scheme, am I impacted?
You won’t be impacted as your employer pays
contributions from your income before it is taxed,
so you will continue to receive the right amount
of relief.
The tax bands shown assume that you are in
receipt of the full personal allowance, (which is
abated where income exceeds £100,000).
If you require advice about claiming relief on pension
contributions, are uncertain of your Scottish resident-
status or have any general tax questions, please
do not hesitate to contact me at aileen.gates@
campbelldallas.co.uk or telephone on 0141 886 6644.
www.campbelldallas.co.uk twitter - campbelldallas
How do I know if I’m a Scottish taxpayer?
If HMRC have recorded you as being a Scottish
taxpayer there will be an S at the end of your tax
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