With lockdown restrictions continuing and many individuals not able to work consistently in their usual offices, it has become clear that many young Scots, who usually live and work in London (and other UK cities) are giving up their expensive accommodation and relocating back to Scotland, but it could cost them thousands, said leading tax and advisory firm Blick Rothenberg.
Robert Salter a director at the firm said: ‘The problem is that that income tax rates in Scotland are considerably higher than in the Rest of the UK for medium or high earners. Moving back to mum and dad can make a great deal of sense – it eliminates the need to pay expensive London rents and can also help address the feelings of isolation that have arisen for many during the COVID-19 lockdowns, but that this change of residence can have unforeseen tax consequences.’
‘Someone earning £50,000 per annum, who is Scottish tax resident will actually pay approximately £1500 more in income taxes, than someone who is resident in the Rest of the UK. It is very easy for someone to ‘inadvertently’ become a Scottish tax resident without having consciously considered the position. If someone happens to live in Scotland for 183 days in the tax year (i.e. between 6th April 2020–5th April 2021), they will be a Scottish tax resident for the whole year and be liable to Scottish taxes on all of their income for the year.’
Robert added: ‘Additionally if they actually have two ‘homes’ available to them during the year – one in Scotland and one in the Rest of the UK, it is actually possible that they could be Scottish tax resident even when they spend less than 183 days in Scotland during the tax year.
‘That could be the case where one’s wider links (e.g. family ties, social links, personal property) in Scotland are held to be more substantive than the ongoing links one has retained in the Rest of the UK. Anyone with concerns about their Scottish status should discuss the position directly with HMRC to clarify if they are becoming liable to Scottish taxes. By doing this pro-actively, taxpayers can ensure that any additional taxes which may be due can be collected pro-actively via the PAYE system.’
Robert concluded: ‘Nobody who is in this position should ignore the situation or they could find that they owe significant additional taxes – which could need to be settled at short notice – e.g. as part of the 2020–2021 UK tax return filing.’
‘However, there may be some ‘good news’ for some groups though from a tax perspective. For example, Scottish-based individuals who relocate to the Rest of the UK during COVID-19 may be able to benefit from the lower income tax rates in the rest of the UK. In addition, lower earners who relocate to Scotland may benefit from slightly lower tax rates than those based in other home nations.’
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