Complications for the sake of it.

[Alaric]

If the tax system wasn't complicated enough, the Scottish Parliament are introducing extra complications.

It was simple to understand that you paid no tax on earnings up to £ X, 20% on £ X to £ Y and 40% above £ Y.

Such is the desire for politicians or perhaps civil servants to tamper, that the Scottish Parliament now want tax rates in Scotland to be

0% on earnings up to £ 11850
19% on earnings from £ 11850 to £ 13850
20% on earnings from £ 13850 to £ 24000
21% on earnings from £ 24000 to £ 44273

This seemingly breaks an election pledge not to increase the basic rate of tax, but apparently only 30% of Scottish taxpayers will be worse off. So that's all right then.

I suppose we'll get the same nonsense in England should there ever be a government relying on Scot Nat support.

[swill453]

And the impact to anyone earning up to £35,000 is less than £100 a year either way. Tinkering round the edges or what?

Scott.

[daveh]

My question is:

I earn (for tax purposes*) just below the high rate band as was ie a bit less than the £44K, but I also have some interest (well within the £1000 tax free band) and some un sheltered dividend income which is within the dividend allowance of £5000 for 16/17 and I am planning to get it within the £2000 allowance for 17/18 by some judicious bed and ISAing at the start of the tax year. So I have no extra tax to pay above PAYE and don't do a tax return.

But with these new bands how will my dividend and interest income be added on to my earned income at the final step and so:
% on earnings the first £ 11850 of my salary
19% on earnings from £ 11850 to £ 13850 of my salary
20% on earnings from £ 13850 to £ 24000 of my salary
21% on earnings from £ 24000 to £ 39000 of my salary and then
0% on the ~£300 of interest
0% on the <£2000 of dividend income

in which case I'll not owe extra tax and won't need to do a tax return

or will it push more of my salary into the 21% tax bracket, so I'll owe more tax and need to inform HMRC so they can calculate my tax correctly?

* I actually earn more than the higher rate, but pension payments mean the taxable income is below the higher rate band.

[gryffron]

I suppose we'll get the same nonsense in England should there ever be a government relying on Scot Nat support.

I think it is near certain as Labour are still determined to bring back the 10% band for lower earnings. Even though it achieves NOTHING that raising the tax threshold by half as much achieves much more simply. But of course, that is a Tory policy

Gryff

[johnhemming]

There is no inherent rule that income tax should never go up.

[johnhemming]

No, but there seems to be an inherent rule that the tax manual becomes ever more complicated for little real public benefit. What ever happened to "tax shouldnt be taxing"?

I don't know. From a purely personal perspective it does not seem any more complex than it has since I stopped being PAYE in 1983.

[scotia]

The new Scottish Tax Rates are not Complications for the sake of Complications. They have a very definite, if cynical, political purpose. The 19% tax band ensures that the SNP can claim to have reduced the tax on those with a salary below £24000. However the ludicrously small amount of this reduction (£20 maximum) won't cost too much, and consequently won't have a significant effect on the necessary tax increases which need to be applied to the (slightly) better off.
However, whoever thought of this wheeze would appear to be ignorant of the complications it creates for Tax computations. As has been mentioned elsewhere - did the SNP have any idea how this will affect such mundane matters as the tax relief on pension contributions?
Lots of nice work for the accountants, and more expenses for small businesses.
I'm a Scottish Higher Tax payer, and I don't object to paying extra tax - but this ludicrous scheme requires severe condemnation.
PS - I have already penned a similar message, but it doesn't seem to have appeared - so apologies if you see this twice. This time I'll make sure I have pressed the submit button.

[Alaric]

However, whoever thought of this wheeze would appear to be ignorant of the complications it creates for Tax computations.

When devolved powers included giving the Scottish parliament tinkering powers with tax rates, did anyone point out the dangers of giving children matches to play with?

If you did make tax digital, would it make sense to have a multitude of tax bands, so you started with 10% at about £ 12000, rising a couple of percent every couple of thousand until you hit the maximum rate? That's a total antithesis to what some countries have allegedly done, namely to have a single flat rate for all incomes.

[scotia]

When devolved powers included giving the Scottish parliament tinkering powers with tax rates, did anyone point out the dangers of giving children matches to play with?

The original devolution agreement allowed the Scottish Parliament to adjust the standard rate by (plus or minus) 3p - but no political party was inclined to grab this thistle - and I believe that the powers lapsed due to the HMRC not being informed of their intentions.
The later devolution agreement provided increased powers - but added responsibilities, which is an extremely necessary feature, since we all know what follows on from "Power without responsibility". So I don't think that sensibly selected Scottish Tax rates should be a big deal - however today's politically inspired tinkering bore no relation to such a policy.

[Lootman]

There is no inherent rule that income tax should never go up.

Taxes go up every year by default, because of inflation. In theory the extra taxes thereby collected should cover the extra costs caused by that very same inflation. And more so, since that inflation pushes basic-rate taxpayers into higher-rate taxpayers, meaning that the bands and allowances should also be adjusted upwards.

So for a government to increase its actual tax rates signifies an ideological shift. That was true when Thatcher slashed UK tax rates (paradoxically raising revenues as predicted by Laffer) as well as when the SNP increases tax rates which, very likely, will reduce revenues as Scots park their wealth or themselves a few dozen miles further south.

The fashion now is to polarise people by hitting a minority with a tax hike and hoping the majority will vote to legally mug their more successful brethren. Such a divide-and-conquer policy, with all the attendant undertones of class warfare and envy, is repugnant to me. And since the successful are typically the most mobile, ultimately these tax hikes will have to apply to the majority who do not have the privilege of choosing their domicile. Back when the UK had a 83% top rate of income tax, even the relatively low paid had a marginal rate of 35%. Many of the smart and successful emigrated; the poor could not and paid astounding marginal rates of tax on their meagre incomes.

But ultimately I don't blame the SNP. I blame the Scottish voters for thinking that they can have free everything and there will always be someone else to pick up the tab.

[scotia]

I'm currently reading Ken Clarke's Political Memoir - "Kind of Blue". While he was Chancellor he oft quoted Jean-Baptiste Colbert, Louis XIV's finance minister:- "The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing"
To that end he invented a few new taxes - e.g. Air Passenger Tax and Insurance Premium Tax. Simple to apply, with few obvious complications. Maybe we need to emulate such inventiveness.