Scotland's 'No' vote: What does this mean for UK tax?
Although Scotland voted no to independence, the nation can still expect significant changes to their current taxation landscape.
The 'no' vote resulted in a promised settlement nicknamed "devo max" which is set to enhance powers for Scotland without full autonomy from the rest of the UK. Alongside a variety of proposed financial changes, Scotland is expected to gain greater powers which will enable the country to set its own tax rates.
The Scotland Act 2012
The Scotland Act 2012 is a new constitutional settlement that will transfer more powers over to the Scottish Parliament and is expected to be published in January 2015. The final details of the Act will be decided in May 2015, following the result of the General Election. The move has been described as,
The largest transfer of fiscal powers from central government since the creation of the United Kingdom."
Michael Moore, Secretary State for Scotland.
The increased powers brought by this new legislation will allow Scotland to alter tax rates by up to 10p in the pound. At the moment, the Scottish Parliament has the ability to amend tax rates by up to 3p in the pound, although this power has never been used to date.
The Scotland Act also gives the Scottish Parliament the powers to alter income tax rates. Prior to the referendum on 18th September, Scotland's income tax rate followed the same structure as the rest of the UK. With the proposed increase in powers, Scotland will now be able to raise or reduce income tax rates by 10%, however, The Act stipulates that any changes made must affect all tax bands.
What would a 'Yes' vote have meant for taxes?
Of course, nothing had yet been set in stone by the Yes campaign but the country was preparing for a considerable amount of upheaval in the event of total autonomy. Significant changes were expected to be implemented within a short space of time and huge cuts or tax increases would have been needed in order to keep the pound or to introduce a new currency.
The future of Scotland's taxes
Unfortunately, it's difficult to predict what will happen with regard to the future of the UK's taxes. Following the independence result, David Cameron signalled that he may have to prepare for the biggest upheaval in the British tax system to date.
Scotland's newfound ability to control its own income tax rates could result in differing rates between Scotland and the rest of the UK. It's also expected that Wales and Ireland will follow suit, and will be granted equal powers to make decisions on their own tax issues.
The timeline for tax changes within Scotland are as follows:
|Date||Changes to legislation|
|Dec 2014||Scottish tax rates to be announced|
Stamp Duty Land tax to be replaced by Land and Buildings Transactions Tax which will be collected by Scottish government
|April 2015||Scottish Landfill Tax will replace the UK's current landfill tax regime|
|April 2016||Scottish Parliament to set basic income tax rate, new tax codes given to Scottish-domeciled employees|
The next few years will see devo max bring new proposals for taxation and related legislation within Scotland and also potentially within Wales and Ireland.
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