A Paye Settlement Agreement (PSA) is an arrangement between an employer and HM Revenue and Customs (HMRC) that allows the employer to settle the tax liabilities of their employees. If you`re in Scotland, there are a few things you need to know about PSAs.
Firstly, it`s worth noting that the Scottish income tax rates are different from those in the rest of the UK. Scotland has its own tax bands and rates, which means that if you`re calculating a PSA, you`ll need to take this into account.
For example, in the 2021/22 tax year, the Scottish higher rate of income tax kicks in at a taxable income of £43,663, compared to the rest of the UK where it kicks in at £50,270. This means that if you`re calculating a PSA for Scottish employees, you`ll need to be aware of this difference and adjust your calculations accordingly.
Another important point to note is that if you`re an employer in Scotland, you`ll need to register for the Scottish Rate of Income Tax (SRIT). This is a separate registration process to registering for PAYE, and you`ll need to do it if you`re liable to pay the SRIT.
Once you`ve registered for SRIT, you`ll need to make sure that you`re deducting the correct amount of tax from your employees` pay. This will depend on their tax code and the Scottish income tax bands and rates, so it`s important to keep up to date with any changes.
When it comes to PSAs, the process is largely the same in Scotland as it is in the rest of the UK. You`ll need to apply to HMRC to set up a PSA, and they`ll review your application and let you know if it`s been accepted.
If your PSA is accepted, you`ll need to calculate the tax due on the benefits and expenses you`re settling, and pay this to HMRC. You`ll also need to provide your employees with a copy of the PSA, so they`re aware of what`s being settled on their behalf.
Overall, if you`re an employer in Scotland and you`re looking to set up a PSA, it`s important to be aware of the Scottish income tax rates and bands, as well as the separate registration process for SRIT. By keeping these factors in mind, you can make sure that your PSA is set up correctly and that you`re meeting your obligations as an employer.