1 December 2015

Scottish hairdressing and beauty salons and barber shops are being warned they need to speak to their payroll provider or administrator to make sure they are ready for a change in income tax rules in Scotland that is due to come into effect next April.

HM Revenue & Customs has said it will begin sending out letters about the change to anyone it has identified as being a Scottish taxpayer as early as this week.

A new Scottish rate of income tax is due to come into effect from 6 April 2016, as part of giving Scotland greater devolved powers.

The move will not change how salons report or make payments for income tax or affect National Insurance Contributions but it will mean employers will have to apply a new “S” tax code to employees classed as Scottish taxpayers.

All Scottish taxpayers will be sent a new tax code prefixed by an “S”, and so HMRC has recommended businesses make sure their payroll software is up to date and they are apply to apply the new tax codes.

Employers will not need to show the Scottish rate separately on P60 forms or payslips, but they will need to show the Scottish tax code, HMRC has said.

NHBF chief executive Hilary Hall said:

This change should not have a huge impact on most salons on a day-to-day level, but it is something salons need to prepare for.  If employees do not have the correct code, they could end up paying the wrong tax on their wages which can cause administrative headaches to sort out later on.

“Salons should also be aware that, depending on the level at which the Scottish Parliament decides to set income tax, it could mean Scottish employees paying a different rate of income tax to workers in the rest of the UK.

“But even if the Scottish rate remains unchanged, salons employing Scottish taxpayers will still have to apply the new S code.

“It is also a good idea to explain this change to your staff and emphasise it is even more important between now and April that they inform HMRC if their address changes so as not to end up paying the wrong tax,” Hilary added.

Detailed advice on the change can be found at: gov.uk/scottish-rate-income-tax