Local Income Tax for Scotland - Scottish government consults on abolition of council tax

View the previous news item in Scottish Service Tax

20 March 2008

In November 2004, a "private member" Bill was introduced in the Scottish Parliament which would have replaced Council Tax in Scotland with a type of local income tax that would be collected through the payroll, paid to HMRC and forwarded to the appropriate local authorities in Scotland. However, the Bill was rejected at its first Parliamentary stage.

The current Scottish Government is now consulting on its own proposals to introduce a local income tax and to scrap council tax in Scotland. It is claimed that individuals on low and middle incomes will be better off by an average £350 to £535 a year and only those in the top income decile will, on average, pay more. Council tax levels will be frozen until the new tax is introduced.

The consultation proposes:

• a 3% rate of tax applied to the income that is subject to basic and higher rates of UK income tax
  
  
• a tax free personal allowance that matches the UK personal allowance levels
  
  
• collection that complements the existing national system through Pay as You Earn (PAYE) and self-assessment
  
  
• exemptions for savings and investment income
  
  
• A tax for second homes, which will be subject to local requirements, and broadly comparable to the current council tax on second homes.

The consultation document seeks views on a variety of approaches to the new tax, in particular

• whether the tax rate should be set, with parameters, by local councils instead of being a 3% flat rate
  
  
• the different kinds of earnings, e.g. from pensions, savings, investment, second homes, on which the charge should be levied, rather than just on earned income
  
  
• the definition of a "Scottish taxpayer"
  
  
• alternative methods of collecting the tax, e.g. a Scottish collection agency, or local councils
  
  
• whether the tax should be collected at source or by payment.

The deadline for responses to the consultation is 18 July 2008.

...UK Payroll News - Latest

Source:
Plans to scrap council tax published
A Fairer Local Tax for Scotland

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