Nicholas Clap

Originally published in Money.

On 18th September millions of Scottish citizens will cast their vote, either in favor of independence, or of staying with the UK. Scotland breaking from the Union could have a huge impact on your finances - we explain how.

The debate about whether Scotland should split from the United Kingdom was always going to be dominated by hyperbole and patriotic rhetoric - from both sides.

But underneath all the chest beating and flag waving, what are the facts?

We look at 4 key Scottish referendum questions and what the Scottish independence financial implications would really be for you - whether you live north or south of the border...

1. Will there be a currency consensus?

The question of what happens to Scottish currency after independence is one of the most contentious issues of the entire referendum debate.

The SNP wants to continue using the pound and has threatened to renege on taking its share of the UK's national debt, using this stance as a bargaining chip to negotiate a deal.

Westminster on the other hand has said there will be no currency union and that Scotland would not be able to survive as an independent nation if it uses its own version of the pound.

If a currency union was agreed between an independent Scotland and the UK, it could require some sort of banking and fiscal union too, limiting the control Scotland would have over its interest rates, taxes and spending.

If Scotland was able to keep the pound, it would still be linked to rates in the rest of the UK (and the Bank of England's rate) so the amount you pay for things like mortgages could stay fairly level.

Choosing a new currency could have a dramatic impact on how much you pay (in an independent Scotland) because the country could be seen as a borrowing risk. If the country has to pay more interest on the money it borrows, this will hit you if you have a mortgage and you'll also pay more in interest.

As an independent nation, the SNP could seek European Union membership and take on the euro as its currency, though this would take time and be far from guaranteed (the Eurozone has a number of countries considered credit risks so may be reluctant to let another one join).

Rest of UK
Westminster's stance over the pound isn't just about political point scoring. A currency union with Scotland after the referendum would represent a real risk to UK taxpayers, because if Scotland defaults and is fiscally-linked to the Union, the UK public would have to bail the country out.

Some argue a currency union would make trading easier, which is an important consideration as countries within the UK rely on importing and exporting to one another.

The issue is further complicated by the fact that many people across the UK use financial services provided by Scotland-based companies.
Without a currency union, if you have a mortgage or loan from a Scottish company the interest rate could go up, or if you have a savings account or pension with a Scottish financial company its value could go down.

2. How much tax will you pay?

If the result of the Scottish independence poll is Yes to going solo, it's likely to have a profound impact on your taxes.

Government spending per person in Scotland is greater because of the cost of the public service sector, so to sustain this the government might have to raise tax levels - meaning you'll pay more.

One of the main arguments for Scottish independence made by the Yes camp is that, as an independent nation, Scotland would be able to redefine its taxation structure. This could mean the amount you pay is linked to how much you can pay - so those who earn more would pay more.

North Sea oil revenues vs. lost UK contributions
While Scotland could lay claim to a lot of the North Sea's reserves, their long-term value has been questioned. The oil market is notoriously volatile so there's no guarantee prices would stay high or competitive.

It's also debatable whether a greater tax on oil revenues and profits would make up for the amount of money an independent Scotland would lose in contributions from the rest of the UK, resulting in a greater deficit.

Rest of UK
It's hard to say how tax levels in the rest of the UK would change and it would largely depend on the terms of independence.
With government spending per head being higher in Scotland, if the country left the Union and you live in the UK you might actually end up paying slightly cheaper taxes.

However, if Scotland took ownership of the lion's share of North Sea oil reserves, the UK will be unable to tax profits generated by selling the natural resource.

The loss of that revenue stream could mean you have to pay higher taxes to make up for the shortfall if you live in the rest of the UK.

3. What does the future hold for pensions?

With a population of fewer than six million people and lower life expectancies than elsewhere in the UK, an independent Scotland should be able to spend less money on pensions than the rest of the Union.

Of course, if you work in the public sector you expect to receive a public sector pension. Scotland has a comparatively large public sector, meaning proportionately the Scottish Government would have to pay more to cover public sector pensions.

Rest of UK
An ageing population means more will have to be spent on pensions in the future across the entire country - including Scotland.

It's likely that there will also be greater pressure put on public services to care for them.

If you live and work in the UK, it's not only likely you'll have to pay more taxes to cover the elderly population's state pensions, but that you'll have to wait for longer until you can claim your own.

If Scotland breaks from the Union following the Scottish independence referendum and takes a lot of public sector workers with it, the remainder of the UK shouldn't need to cover their Scottish pensions.

4. What will be the impact on businesses?

While there are relatively few Scottish independence facts, about what will definitely happen should the country break from the UK, there have been reports about what could happen.

The Scottish Chambers of Commerce suggests almost a fifth of businesses would consider leaving an independent Scotland- a significant figure. Of course, that also implies the vast majority are currently happy to stay.

If companies did decide to up and leave, regardless of how many went it would still mean the country earns less money through corporate taxation.

Decades of free movement and trade between countries making up the United Kingdom means each region relies on importing from and exporting to the others, so these links would almost certainly be maintained even if Scotland chooses independence.

Rest of UK
The rest of the UK would still represent a far larger market, even without Scotland. As such the UK should have more of a say when it comes to negotiating the value of whatever it imports and exports north of the border, so the prices you pay for some products might fall.

On the other hand, with a larger population the UK needs to buy more products than it can sell back in return.

For example, if an independent Scotland owns most of what was the UK's oil resources, the rest of the Union would need to buy a lot of it from Scotland. This could see costs increase if companies put up their prices, so there's a chance you'll end up paying more for the same goods.

Nicholas Clapp is a financial content writer for Money. 

Image via Irritable Blonde.