Whilst the United Kingdom shares many things, the rate at which its residents are taxed is not one of them. There are different taxation regulations for England, Scotland and now Wales which of course means that any payroll calculations for employees in each of the countries will be different.
One piece of good news is that, even though we are based in England, we are able to run payroll for all schemes in the UK so we can help you whether you are based in England, Scotland or Wales.
So, what is the key difference? It largely comes down to who decides the tax rates and the percentage rates at which employees are taxed plus the thresholds at which an employee might move into a higher tax band.
In England, it is relatively simple. Taxation rates are decided by HM Government and everything between £12,501 and £50,000 is taxed at a flat rate of 20%. Earnings over £50,000 are taxed at 40% with the higher rate of 45% being applied for all earnings over £150,000.
The rates in Wales are currently the same but since April this year, the Welsh Assembly has been granted powers to set taxation rates for Welsh residents. The new regime means the UK Government will set the tax rate for a proportion of the deduction and the Welsh Assembly will set it for the rest. For this tax year for basic rate taxpayers, the UK Government has set the rate at 10% and the Welsh Assembly at 10% giving an overall rate of 20% to keep it in line with England. But the Welsh Assembly has the power to vary their rate meaning Wales residents could pay more – or less – tax in future that their English counterparts.
In Scotland, it is a bit more complicated as the Scottish Government has introduced a number of new tax bands with the aim for lower income workers to pay less tax and higher income workers to pay a bit more. The introduction of a starter rate of 19% and an intermediate rate of 21% either side of the basic 20% rate means those on low incomes will pay less tax whereas those on higher incomes will pay marginally more. In addition, the higher rate applies at an earnings level of £43,431 and is slightly higher at 41%. The top rate for those earning over £150,000 is also a bit higher at 46%.
So it might seem like a complicated system with big variations across the UK but we have invested in all the software required so the calculations can be made automatically and accurately each time. We can even easily handle situations where a single company might have employees working under more than one tax regime. If you need any help in running your payroll in England, Wales or Scotland; or even across more than one home nation, just get in touch.