If you spend time in Scotland, it’s useful to check whether you’re there enough to become a Scottish tax resident. And if you’re already a Scottish tax resident you might also need to be aware of the implications on your wealth. Peter Webb, our Head of Tax Advisory, takes a look at some of the nuances of the Scottish tax system.
Scotland became entitled to set its own rates of Income Tax on 6 April 2017. Since then, Scottish Income Tax rates have strayed away from those which apply to the rest of the UK. Scottish Income Tax rates for the current tax year, 6 April 2023 to 5 April 2024, are now more divergent than they have ever been.
With this in mind, there are two key questions to explore. Firstly, how do I know if Scottish Income Tax rates apply to me? And what’s the difference between Scottish Income Tax rates and those in the rest of the UK?
Being tax resident in Scotland
To confirm whether Scottish Income Tax rates apply, there’s a pretty simple description. If your main place of residence is in Scotland in the tax year, you meet the test to be a Scottish taxpayer.
However, it may be the case that you live part of the time in Scotland and part of the time elsewhere in the UK, and it might not be clear which place you have the closest connection to. In that situation, where you physically spend most of your time will determine whether or not you are a Scottish taxpayer.
You can’t be a Scottish taxpayer for only part of a tax year; you’re either a Scottish taxpayer for the whole of a tax year or you’re not. It’s also worth noting that, if you aren’t UK tax resident, you can’t be a Scottish taxpayer.
What are the Income Tax rates in Scotland?
There is a difference between Scottish Income Tax rates and those in the rest of the UK. The Scottish rates of Income Tax for the current tax year are shown in the table below:
| Scottish Income Tax rates 2023/24 | Scottish Income Tax bands 2023/24 * |
| Scottish starter rate – 19% | £12,571 – £14,732 (£2,162) |
| Scottish basic rate – 20% | £14,733 – £25,688 (£10,956) |
| Scottish intermediate rate – 21% | £25,689 – £43,662 (£17,974) |
| Scottish higher rate – 42% | £43,663 – £125,140 |
| Scottish top rate – 47% | £125,141 and above |
So how does this compare to the rest of the UK?
| UK Income Tax rates 2023/24 | UK Income Tax bands 2023/24 |
| £12,571- £50,270 | 20% |
| £50,271- £125,140 | 40% |
| £125,141 and above | 45% |
It’s easy to see the difference with some simple illustrations. In the table below let’s assume your only source of taxable income is earnings:
| Earnings | Scotland | England | Difference | Scotland Rate of Tax | England Rate of Tax |
| £25,000 | £2,464 | £2,486 | -£22 | 9.86% | 9.94% |
| £50,000 | £9,047 | £7,486 | £1,561 | 18.09% | 14.97% |
| £100,000 | £30,047 | £27,432 | £2,615 | 30.05% | 27.43% |
| £200,000 | £78,178 | £73,689 | £4,489 | 39.09% | 36.84% |
So, for lower earnings, being a Scottish taxpayer means you’ll save a little bit of Income Tax. However, once you hit the higher rates of tax, you’ll pay more as a Scottish taxpayer than you would if you were resident in another part of the UK.
With different tax rates and liabilities, it matters whether or not you’re a Scottish taxpayer. And if you are liable to Scottish rates of tax, you’ll need to ensure your Self-Assessment Tax Return is completed correctly. In addition, if you have tax deducted from your employment income or pension it’s important your PAYE coding notice shows that you’re a Scottish taxpayer; the code on your payslip will start with the letter “S”.
Please do get in touch if you would like help understanding whether or not you’re liable for Scottish rates of tax.
