Charlotte Barbour of ICAS welcomes changes in the tax filing process announced by the Chancellor but says this must be supported through greater simplification and the right support for Scottish taxpayers.

As George Osborne announces the removal of annual tax returns, to be replaced by online filing of all taxable income, the proposal is given a welcome by ICAS. Enormous resources have been put into digitising HMRC processes in recent years and it is sensible to set out a longer term vision of where this will lead - for the public and for HMRC.

For Scottish taxpayers there are the additional intricacies of Scottish income tax to factor in. From 6 April 2016, the rate of income tax for Scottish taxpayers will be reduced by 10p and the Scottish Parliament will have the power to set its own rate - the Scottish Rate of Income Tax (SRIT). This is a partially devolved tax, which involves joint responsibilities, shared by the UK and Scottish Parliaments. The UK Parliament will be responsible for the tax base - what is considered to be income, how it is measured, and how the tax is administered with tax returns and payment requirements; and the Scottish Parliament is responsible for the rate - how much is assessed for collection. Administrative responsibility will remain with HMRC, for which the Scottish Government will pay any additional costs of collection, and much of this will be collected through the PAYE system. For those in self-assessment - well, they'll need to self assess it.

The Scottish income tax rate will be applied to earned income, pensions and rental income, but will not be charged on savings income and dividend income, this being designed to ease administrative pressures and avoid distortions of the UK savings market. In practical terms, the budget announcement about savings incomes is a simplification for most taxpayers that is to be welcomed, particularly in view of the devolution of the taxation of earned income.

And after the election, further powers over income tax rates and bands are to be devolved following on from the Smith Agreement, although this will not affect the administrative arrangements which will continue to be based on UK tax law and administered by HMRC. It is assumed that this will be an extension of the SRIT. No date has yet been set for this.

Scottish taxpayers will also have new taxes to deal with when the devolved taxes, land and buildings transaction tax and Scottish landfill tax, are introduced with effect from 1 April 2015.

ICAS members will, of course, continue to support tax compliance and compliant taxpayer behaviour, making the tax system workable for businesses and reducing the risk of unexpected tax costs for all taxpayers. However, ICAS also continues to call for meaningful simplification of the tax system, and for taxpayers to be better supported by HMRC contact centres in handling their affairs.

Charlotte Barbour is Head of Taxation (Private Clients and Small Business) at the Institute of Chartered Accountants of Scotland (ICAS).