Tax - It's Complicated...

...or at least people like me would have you think so.

It has to be said, though, that this year there is some justification to the claim that 'tax is complicated' especially if you live in Scotland.

The new tax year started on 6th April - we are in the 2018/19 tax year - and in Scotland that date is particularly significant.

It represents the day that the Scottish tax regime diverged significantly from the rest of the UK.  Instead of the four tax bands we had up to 5th April there are now six for those of us who live in Scotland.

(And if you're unsure whether you are subject to the Scottish rate of Income Tax have a look at your tax code - you'll find it on your payslip.  If it has an 'S' in front of it then you are part of the Scottish regime).

So, the new standard tax bands in Scotland are (and this assumed you have standard tax code of S1185):

Income:

From nil to £11,849 - 0%
From £11,850 to £13,849 - Starter Rate - 19%
From £13,850 to £23,999 - Basic Rate - 20%
From £24,000 to £43,429 - Intermediate Rate - 21%
From £43,430 to £149,999 - Higher Rate - 41%
Above £150,000 - Top Rate - 46%

The effect of all this depends on your income levels.  If you are a 'lower' earner you would pay a bit less.  A 'higher' earner would pay a bit more.

For example, if you have a £15,000 salary in the 2018/19 tax year this is how your tax would work out in Scotland (not taking into consideration National Insurance):

£15,000 salary less the personal allowance of £11,850 = £3,150 taxable income
£2,000 of this would be at the Starter Rate of 19% = £380
£1,150 (the rest of the taxable amount) would be at Basic Rate of 20% = £230

Total tax = £610.

If you earned the same amount of money in England you would pay £630 - £20 more than Scotland.

However, if you earned £45,000 in 2018/19 it flips.  Here's the calculation:

£33,150 would be taxable after taking off the personal allowance.

£2,000 of this would be at the Starter Rate of 19% = £380
£10,150 would be at Basic Rate of 20% = £2,030
£19,430 would be at the Intermediate Rate of 21% = £4,080.30
£1,570 would be at the Higher Rate of 41% = £643.70

Total tax = £7,134

If you lived in England and earned the same salary the total tax bill would be £6,630.

You pay £504 more if you live in Scotland.

So - more complicated because of the increased number of tax bands.  And remember the more sources of income you have the more complicated it gets.

If you have some salary, but have a business that you earn from, too, you have some bank savings and some dividends and you rent out a property (and heaven forbid if you sell it during the year and have Capital Gains Tax to calculate!) it does get a little messy.

But not to worry - there's a really good calculator on the BBC website - you can get it here:

http://www.bbc.co.uk/news/business-17442946

To help work out where you are and whether you will be better or worse off.

If you'd like to talk about any of this then feel free to get in touch - we'd be delighted to talk it through with you.