From April 2016, the Scottish Parliament has devolved powers to set the Scottish Rate of Income Tax (SRIT). Within the last few weeks it has been widely publicised that this may mean a higher rate of Income Tax in Scotland as compared to the Income Tax rates in other parts of the UK.

 HMRC have also issued a technical statement that clarifies who will be subject to SRIT.

 According to the statement issued, a Scottish taxpayer will be defined using a simple test:

 “For the vast majority of individuals, the question of whether or not they are a Scottish taxpayer will be a simple one – they will either live in Scotland and thus be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer.”

Factor in the possibility that Income Tax rates in Scotland will be higher than the rest of the UK and tax payers living and working in the border areas may need to reconsider their living arrangements.

For example, a business person living and working in Edinburgh will pay the SRIT from April 2016. If they relocated their family home to say Berwick on Tweed, and continued to work in Edinburgh, they would pay the UK Income Tax and not be subject to SRIT.

Turning this example on its head; consider a person living in Scotland and working in England. They would be subject to SRIT even though their income was earned in England.

Does this mean the north of England will become the UK’s Monte Carlo as wealthy Scots seek to establish tax residence in England to avoid SRIT?

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