Administration of Scottish Income Tax 2017-18
In its report, published today, the National Audit Office has stated that HMRC’s calculation for the Scottish rate of income tax revenue in 2016-17 is fairly stated.
HMRC has calculated the final income tax revenue for the Scottish Rate of Income Tax for 2016-17 as £4,347 million, 5% lower than the original estimate of £4,566 million.
For 2017-18, HMRC estimates that Scottish income tax revenue will be £11,896 million. This increased amount reflects the more comprehensive powers granted by the Scotland Act 2016 which became effective from 2017-18 onwards. These powers allow Scotland to set its own rates and bands for non-saving non-dividend income and retain all income tax raised from Scotland, not just a proportion.
In 2017-18, income tax rules in Scotland differed from the rest of the UK for the first time. HM Revenue & Customs will continue to administer and collect Scottish income tax as part of the UK tax system. HMRC has implemented several assurance processes to maintain the completeness and accuracy of the estimated 2.53 million Scottish taxpayer population. However, this remains a key challenge facing HMRC in ensuring that Scottish income tax is assessed and collected properly.
In 2017-18 HMRC incurred and recharged £4.8 million of costs on the three Scottish income tax projects, of which £0.3 million was running costs, which the NAO concludes is fair under the agreement with the Scottish Government.
HMRC has confirmed that it will refine its estimation methodology to incorporate the new information that it has about taxpayers in Scotland
Notes for Editors
Scottish taxpayers in 2016-17
Scottish rate of income tax revenue in 2016-17, under the 2012 powers
Estimated Scottish income tax revenue in 2017-18
Project implementation costs in 2017-18
Cost of administering Scottish income tax in 2017-18
HM Revenue and Customs’ (HMRC’s) forecast of the remaining project implementation costs
Notes for Editors
1. The Scotland Act 2012 introduced powers for the Scottish Parliament to apply a Scottish Rate of Income Tax (SRIT) to the non-savings, non-dividend income of Scottish taxpayers from 6 April 2016. Section 25 of the Act defines a Scottish taxpayer as someone whose main place of residence in a given tax year is Scotland, or who spends most of that tax year living in Scotland.
2. The Scotland Act 2016 gave the Scottish Parliament full power to determine the rates and thresholds (excluding the personal allowance) paid by Scottish taxpayers from 2017-18. In 2017-18, income tax rules in Scotland differed from the rest of the UK for the first time. Scottish taxpayers paid the higher rate of tax (40%) as soon as they earned £43,000 – as opposed to £45,000 in the rest of the UK. There were no other areas where the UK and Scottish income tax regimes diverged. HM Revenue & Customs continues to administer and collect Scottish income tax as part of the UK tax system. It will pay revenues related to its Scottish tax powers into the UK Consolidated Fund in the same way as it does for all other tax receipts. These revenues will subsequently be transferred to the Scottish Government and the Scottish Government's resource block grant will be reduced accordingly reflecting its revenue raising powers.
3. The Auditor General for Scotland has provided additional assurance to the Scottish Parliament on the NAO’s review of HMRC’s administration of Scottish income tax. You can access her report on the Audit Scotland website. For more information contact email@example.com or firstname.lastname@example.org
4. Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
5. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 785 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services. Our work led to audited savings of £741 million in 2017.