It will allow Scotland to resume control of a huge chunk, although by no means all, of its financial affairs. From 2016, the Scottish Government can set its own income tax, independently of the rest of the UK, leaving the country free to decide whether voters prefer tax cuts or better services.
In a little over five years, the Scottish Parliament will be given total control over the raising and spending of an equivalent 10p tax rate. In other words, Scottish politicians will be able to dictate, but will also have to answer for, the decisions they make relating to half the tax paid by most of the population.
If the consensus is to continue with higher public services, then income tax bills may have to be higher than those living elsewhere in the UK.
A 2p tax hike could leave those on average wages of 25,000, 351 worse off. Their take home pay would fall from 19,249 to 18,898 a year under such a system. Similarly a couple both working and earning 40,000 together would lose 500.
Tax experts are warning this could trigger an exodus south, with staff working in Edinburgh or Glasgow but living and paying taxes in England. Other employees, who spend part of their working week in major cities elsewhere in the UK, may attempt to establish residence there, to avoid higher Scottish taxes. Freelance and contract staff might favour projects outside Scotland where they may be subject to lower tax.
John Whiting, of the Chartered Institute of Taxation, warns: "We need a clear definition of who will be resident for tax purposes. Without it we will have enormous problems and uncertainties when companies try to administer this tax.
"Many people live and work on both sides of the Border. This can be sorted out, but it is by no means straightforward and the costs involved can be significant."
Susie Simpson, of PricewaterhouseCoopers said: "It could mean boom time for Berwick and Newcastle. Many, who split their time between say London and Edinburgh, may be in a position to select their "residence for tax purposes" and decide where they prefer to pay their tax. The higher paid, who contribute most tax, will be the most mobile."
But will Scotland's taxes be higher? This is the big unknown. Currently there is no clear accounting which might shed light on the scale of taxes specifically collected within its borders.
That will change in 2012, when the Office of Budget Responsibility starts producing shadow accounts detailing exactly how much tax is raised in Scotland, and where the money is spent, with forecasts for the years ahead.
Simpson explains: "There is so much we do not know. Scotland might have more self-employed people, for example, which would hit the tax take. But there are all kinds of wrinkles like this."
If it emerges that the cost of public services exceed the tax raised, then the parliament will face tough choices. It will have to ultimately put up taxes or cut spending.
The country is also being given the opportunity to borrow cash to smooth over short-term hiccups. For example, it can borrow to help fund big building and development projects.
Crucially, ministers will also be handed a reserve to allow government to borrow, to override short- term fluctuation in the tax take. However, this will be limited, can only be dipped into occasionally and cannot be used indefinitely to plug black holes.
George McCracken, tax partner at Grant Thornton, comments: "At the moment we are all flying blindfolded until we get more information. But certainly, there is a perception that we have higher levels of public services in Scotland. Whether that's true or not we can't be sure.
"But if I were a betting man, I reckon they will try and stick with the status quo initially, but will have to dip into the borrowing pot to do so. You can only do this to a limited extent and for a limited period. Eventually they may have to put up taxes or cut services."
What about cutting taxes? One argument for financial freedom was that if Scotland could cut taxes, it could make it a cheaper place to live and do business, like Ireland or Luxembourg.
The difficulty with this scenario, is that while low taxes are good for generating booming economic activity, they are not normally synonymous with high levels of welfare support and dependency.
Lindsay Hayward, a tax director at PWC added: "In Scotland much is made of the social contract, which guarantees certain services to people when they need them. But there can be a tension between those who want better services, and those who would prefer lower taxes. If taxes go through the roof, then politicians will be held accountable at the next election.
"Ultimately, the new regime will give us transparency and accountability. There are all kinds of perceptions which need to be challenged. At last we will have the information to challenge them."
Worried? Scotland on Sunday answers your questions.
Q: Which taxes are we talking about?
A: Where personal taxes are concerned Scotland will be able to set income tax currently equivalent to a 10p rate, plus stamp duty land transaction tax.
It also has powers to introduce new taxes, such as a paper bag supermarket tax, or other green measures. It could also opt to introduce a graduate tax to help pay for university funding.
Q: Will we pay more?
A: Possibly. Ultimately, the government will have to ensure it balances the books by raising sufficient tax revenue to cover its costs. We do not yet have a clear picture of tax revenues versus spending in the country. For example, it could be that Scotland has more self-employed people, which has enormous implications for tax revenues. The picture will become clearer in 2012 when we get regular tax forecasts.
Q: How much more will we have to pay?
A: As outlined above, if taxes go up by 2p, someone on average wages of 25,000 could find themselves 351 worse off, with their take home pay cut from 19,249 to 18,898.
A couple both working and earning 40,000 together would lose 501. Their take-home pay will fall from 31,698 to 31,197
Finally, higher earners with two children, on a joint salary of 113,000 (with one spouse earning 80,000 and the other 33,000), lose 1,961 when their take home pay falls from 77,744 to 75,783.
Q: Why don't they cut taxes?
A: The parliament could do, and in that case families would save the above amounts. Our example of someone on earnings of 25,000 would see take home pay rise from 19,249 to 19,600. The family on modest earnings would take home 32,199 rather than 31,698. While taxpayers may welcome this boost to their pay packets, public services would have to be reformed if taxes were reduced, unless it coincided with a surge in economic growth.
Q: Why don't they soak the rich?
A: They could do. The legislation allows for different increases to be made across the bands, so the rates do not have to increase proportionately across the board. Whiting said: "Initially, the tax structure is supposed to be aligned with that of Westminster. However, they could tinker with the bands, and ultimately there would be nothing to stop them introducing higher levels of tax on higher earnings."
Q: How will taxes be collected?
A: This will not change. Tax will be collected for most people under the Pay As You Earn system, taken by HM Revenue and Customs straight from pay packets.
However, this could prove a headache for employers who may now have UK staff taxed at different rates. In some cases individual staff members could be paying different rates.
It will also prove problematic for the self-employed and freelance staff who might find themselves being taxed on different slices of work depending on where in the UK the contract originated.
Q: Will stamp duty on property purchases be scrapped?
A: Possibly. The parliament will be free to introduce a new form of property tax. We do not yet know how much stamp duty rises in Scotland. If it is not much, it could be scrapped and replaced by a different kind of property tax. Alternatively changes could be made to the current banding system. As property prices are lower in Scotland, the parliament could introduce more bands lower down the scale to catch more buyers.
Q: I work in Edinburgh but live in Berwick. Which tax regime will I come under?
A: That is not yet clear until we get further regulations. So far the legislation says that you are resident for tax purposes if you are a Scottish resident or "closely connected" with Scotland.
In Europe there are examples of cross-border tax avoidance where people work in one country and live in another with lower income taxes. Similarly in the US, there are state border issues for Federal taxes.
Although in both scenarios there are cross-Border tax evasion measures, these apply to companies rather than individuals.
In practice, people will often move to the most tax efficient place for them to live.
Q: I live in Edinburgh but work in Birmingham, commuting weekly, while my wife works in Edinburgh. Could we end up paying different rates of tax?
A: It does sound strange, but yes it is quite possible. It is hard to see how you could be taxed under Scottish law if all your earnings come from outside the country. But there could undoubtedly be unfairness within families, if a wife is left at home with the family and pays higher taxes as a result. This will be compounded where she is the lower earner, as will often be the case. But these are issues still to be resolved.
Q: I spend half my week in London. Would this leave me free to decide where to pay taxes?
A: It may do. We may end up counting which days you were in Scotland and which in London, as we already do with overseas workers claiming exemption for UK tax.
Q: I live south of the Border, but sometimes carry out work in Scotland under contract. Could I be taxed on my earnings there at a different rate from my other UK earnings? And wouldn't this be unfair, if I neither had a vote in Scotland nor benefited from any of the services?
A: You could do. Under existing UK tax law, tax can be deducted from money earned within our borders, even where someone is not resident for UK taxes.