Tax relief change on Scottish pensions

All registered pension scheme administrators will need to make alterations to their IT systems before April 2018, following the introduction of the new Scottish Rate of Income Tax. The new legislation came into effect in April this year.

HM Revenue and Customs (HMRC) has already begun to update its online guidance on pension tax in order to try and aid administrators in meeting the new requirements of the Scottish personal tax regime.

Currently, administrators don’t need to do anything different for Scottish taxpayers, as relief is still able to be claimed at source. Until the deadline of April 2018, any adjustments can be made through the government’s traditional self-assessment portal or through PAYE coding.

However, from April 2018, pension providers and managers will both have to start claiming relief at source and at the correct rate.

It’s worth noting that the new rate doesn’t apply to all Scottish taxpayers: for those under the banners of either additional rate or higher rate, the new SRIT legislation will have no impact. Higher rate taxpayers will still be able to claim tax relief either by contacting HMRC or through their tax return.

Pension administrators will need to be provided with a number of key data points before they can claim back any basic rate tax relief. Taxpayers looking to obtain refunds on their contributions will need to provide their full name and address, date of birth and either their National Insurance Number or a statement noting that they don’t have one. (This will be particularly applicable if the member is either under 16 or a non-UK citizen not currently living in Britain).

Taxpayers will also need to provide details about their employment status and make declarations upfront stating that they will inform their pension scheme should they make any contribution that doesn’t qualify for tax relief.

It’s worth noting that the majority of pension schemes will collect the above information upfront when the member joins and will also seek to obtain the relevant declarations before the scheme is set up.

Date published 9 Jun 2016 | Last updated 9 Jun 2016