Scottish Income Tax - operation by HMRC: service level agreement

Introduction

Background

The Scotland Act 2016 gives the Scottish Parliament the power to set income tax rates and the thresholds (excluding the Personal Allowance) on the non-savings and non-dividend income of Scottish taxpayers. It does this by amending the Scotland Act 1998.

Scottish Income Tax (SIT) remains part of the UK Income Tax system and continues to be administered by His Majesty’s Revenue and Customs (HMRC). Responsibility for the Personal Allowance, tax base, and tax reliefs remain reserved to the UK Parliament.

Forecast SIT receipts flow from HM Treasury into the Scottish Government’s Consolidated Fund. This amount is reconciled annually against the amount of Income Tax that HMRC collects.

HMRC remains accountable for the collection and management of SIT and need to be able to evidence that they are doing so in an efficient and effective manner.

The Scottish Government is required to meet any net additional costs incurred by HMRC as a result of the introduction of SIT.

The Scottish Government needs sufficient data from HMRC to:

• discharge its duties in respect of: forecasting, developing Income Tax policy setting rates; and budgeting for any variance in SIT collected against forecasts
• assure itself of HMRC’s efficiency and effectiveness in operating SIT

In the 2025 Budget, the UK Government announced a measure to introduce separate tax rates for property income from April 2027. The Scottish Government is being provided with the power to set devolved property Income Tax rates.

Purpose

This Service Level Agreement (‘Agreement’) sets down the requirements, timescales, and performance measures for the operation of SIT which will ensure a consistent quality of service to Scottish taxpayers and allow HMRC and the Scottish Government to meet their respective responsibilities in respect of operating SIT.HMRC is committed to the continuous improvement of its operation of SIT. HMRC will, in line with its practices, ensure that improvements to its processes and procedures for operating SIT are implemented where possible and cost-effective.

The principle of openness also underlies this document. Information in relation to the matters within the scope of this Agreement will be shared freely between Scottish Government and HMRC, subject to relevant legal or contractual conditions including the General Data Protection Regulation (GDPR) and the Freedom of Information Acts. Information covered by HMRC's obligations to protect taxpayer confidentiality will continue to be so covered.