Pay and benefits: key differences in Scotland and Northern Ireland
PAYE tax (Scotland): The Scottish Government has published proposed income tax rates and bands for 2018/19, including new starter and intermediate bands. The proposed bands and rates are set out below:
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The personal allowance of individuals who earn more than £100,000 will reduce by £1 for every £2 earned over that amount.
The Scottish Government also announced in its Draft Budget 2018/19 that it will raise the student loan repayment threshold to £22,000 by the end of the current parliamentary session. (Only plan 1 loans apply in Scotland.)
Pension contributions tax relief under relief at source arrangements will be claimed at the Scottish basic rate from April 2018 (see Pensions > Key differences in Scotland and Northern Ireland > Future developments).
Guarantee payments (Northern Ireland): To date, there has been no announcement of an increase in the maximum guarantee payment payable, for 2017.
The Attachment of Earnings Act 1971 does not apply in Scotland. The Debtors (Scotland) Act 1987 is the governing legislation and under this an earnings or current maintenance arrestment order can be served in addition to a conjoined arrestment order where two or more debts of the same or different types are owed. A schedule may be served on the employer requiring it to make prescribed deductions from the employee's earnings until the debt is discharged. The net arrestable earnings are gross earnings less tax, national insurance contributions and pension contributions. The employer must record and reduce the amount owing on the order, by the deduction made each pay period, so that it knows when the order is complete. For earnings arrestments, the employer is supplied with a table to look up earnings, which gives the prescribed deduction. For maintenance arrestments the employer calculates the protected earnings and deduction based on the calendar days in the month.
Where holiday pay is paid in advance in one pay period for weekly paid employees, the arrestable earnings and deduction are first calculated excluding the holiday pay. Each amount of holiday pay is considered separately and the resulting amounts added together to achieve the total deduction.
The court or creditor will give the employer details about methods of payment. The employer can also deduct an administration charge from the employee's pay to cover the administrative costs for operating the order. From 5 April 2006 the prescribed sum is £1.
The Bankruptcy and Diligence etc (Scotland) Act 2007 reached the statute books on 30 November 2006. Part 9 of the Act "Diligence against Earnings" was brought into force by the Bankruptcy and Diligence etc (Scotland) Act 2007 (Commencement No.3, Savings and Transitionals) Order 2008 (SI 2008/115).
For orders operated for pay dates on or after 1 April 2008 a percentage-based apportionment of the total monies available for deduction, where both an earnings arrestment and maintenance arrestment are in force, replaces the previous priority afforded to an earnings arrestment order. The employer must provide both the debtor and the creditor (sheriff clerk for conjoined orders) with more information about the application of the order, within specified time limits.
If the employer has to apply an earnings arrestment, a current maintenance arrestment or a conjoined arrestment order to an employee's earnings, no student loan deduction should be made. Child support deductions from earnings orders take priority over the three types of Scottish order.
From 6 April 2016, the tables used to deduct earnings arrestments in Scotland were amended, in accordance with the Diligence against Earnings (Variation) (Scotland) Regulations 2015 (SSI 2015/370). Employers must apply these Regulations to new and existing arrestments on or after 6 April 2016.
The daily protected earnings figure for current maintenance arrestments rose to £16.24 from 6 April 2016.
Scottish Debt Arrangement Scheme
From 30 November 2004, employers are liable, where requested by an employee, to manage the payment of multiple debts for employees who are habitually resident in Scotland under a Debt Arrangement Scheme. Under the scheme employees are able to issue a payment mandate (form 6) authorising their employer to deduct a specified amount on every pay date from their net earnings to pay off certain debts. The deduction, while mandatory for the employer to undertake, has no priority and it is for the employer to decide in which order it is deducted among the employee's other voluntary deductions. Deductions must be made until the total sum has been repaid or until notice of recall of this instruction if this is earlier. If there are insufficient net earnings, as much as possible of the amount should be deducted. The employer does not record the under-deduction as it is not expected to deduct arrears in a subsequent pay period. The employer may deduct a £1 administration fee from the employee each time it makes a deduction and may be liable to a penalty for non-compliance with the mandate.
For tax purposes, the UK comprises England, Scotland, Wales, Northern Ireland and their islands. Save as set out below, there are only minor differences in the operation of tax law throughout the UK, eg the calculation of the basic living accommodation charge, which is based on rateable values.
Sections 25 and 26 of the Scotland Act 2012 made amendments to the provisions relating to the Scottish Parliament's tax varying powers. The Scottish rate of income tax is determined by reducing the rate for the rest of the UK (rUK) by 10 percentage points and then adding the Scottish rate. The Scottish rate of income tax (set by the Scottish Parliament) can be any rate, in whole or half numbers, without limit. These provisions apply with effect from 6 April 2016.
The Act makes clear that liability for the Scottish rate applies to those resident in Scotland, rather than those working in Scotland. Therefore, employers outside Scotland may be affected. Tax codes issued in respect of Scottish residents will commence with an "S".
The Scottish Government has confirmed income tax rates and thresholds for 2017/18. The higher rate income tax threshold of £43,000 differs from that for the rest of the UK (which is £45,000).
Pension contributions tax relief under net pay arrangements, items in PAYE settlement agreements and in taxed award schemes reflect employees' respective marginal rates of Scottish tax. Payroll giving contributions attract tax relief at the appropriate Scottish rate.
Pension contributions tax relief under relief at source arrangements is claimed at the UK basic rate until April 2018. HM Revenue and Customs will make any necessary adjustments through self-assessment or PAYE coding.
Gift aid relief is at the UK national rates.
Attachment of earnings orders can be made in Northern Ireland to collect unpaid maintenance and civil judgment debts. The relevant legislation is the Judgments Enforcement (Northern Ireland) Order 1981 (SI 1981/226) and the Magistrates Courts (Northern Ireland) Order 1981 (SI 1981/1675). The Child Support (Collection and Enforcement) (Northern Ireland) Regulations 1992 (SI 1992/390) allow the operation of deduction from earnings orders for collection of child maintenance in Northern Ireland.
Child maintenance arrangements in Northern Ireland are the remit of the Department for Communities.
National insurance contributions
National insurance legislation refers to workers in Great Britain, this being England, Scotland and Wales. Northern Ireland has its own system, which is virtually identical to the system in Great Britain and for all practical purposes works in tandem with it.
Statutory sick pay
The provisions relating to the statutory sick pay scheme are the same throughout the UK. However, a different SSP1 exclusion form is used for employees based in Northern Ireland.
Guarantee payments are dealt with in the Employment Rights (Northern Ireland) Order 1996 (SI 1996/1919) (NI 16). The daily limit on the amount of a guarantee payment is £25.90 (from 14 February 2016, previously £25.60). This rate differs from that for the rest of the UK.
Itemised pay statements and statements of fixed deductions
Itemised pay statements and statements of fixed deductions are also governed by the Employment Rights (Northern Ireland) Order 1996 (SI 1996/1919) (NI 16).
Debtors (Scotland) Act 1987
Scotland Act 1998
Bankruptcy and Diligence etc (Scotland) Act 2007
Scotland Act 2012
Scotland Act 2016
Judgments Enforcement (Northern Ireland) Order 1981 (SI 1981/226) (NI 6)
Magistrates Courts (Northern Ireland) Order 1981 (SI 1981/1675) (NI 26)
Child Support (Collection and Enforcement) (Northern Ireland) Regulations 1992 (SR 1992/390)
Employment Rights (Northern Ireland) Order 1996 (SI 1996/1919) (NI 16)
Employment (Northern Ireland) Order 2002 (SI 2002/2836) (NI 2)
Employment (Northern Ireland) Order 2002 (SI 2002/2836)
Debt Arrangement Scheme (Scotland) Regulations 2004 (SSI 2004/468)