If you live in Scotland then you pay the Scottish Rate of Income Tax to the Scottish Government. This is paid on pension payments, salary and the usual other taxable income streams. You will be given the letter S in your tax code to signify that you are paying the Scottish rate of income tax.
Does this mean paying extra income tax?
No. The Scottish rate of Income Tax is 10%, but this is calculated from within the UK Income Tax amount, so you are not paying any more.
For example:
UK Basic rate is 20% within the income bracket of £11,001 – £43,000
UK Higher rate is 40% within the income bracket of £43,001 – £150,000
UK Additional rate is 45% for those earning over £150,000
The income bands are the same and Scottish taxpayers pay:
Basic rate – 10% to UK government, 10% to Scottish government = 20% total
Higher rate – 30% to UK government, 10% to Scottish government = 40% total
Additional rate – 35% to UK government, 10% to Scottish government = 45% total
Why do I have an S in my tax code?
HMRC have used the letter S to show that someone is paying the Scottish rate of income tax. You tax code is important because it tells your employer how much tax should be deducted from your salary. You can find out more about tax codes in our income tax code guide.
Is there a Personal Allowance in Scotland?
Yes, this and the Income Tax on dividends and savings amount is the same as the rest of the United Kingdom. The personal allowance usually changes each tax year effecting how much income tax you pay each tax year.
Who pays this Scottish Income Tax?
You pay the Scottish rate of Income Tax if you more to or from Scotland, if you frequently stay in Scotland but do not have a home there, or if you have a dwelling in Scotland and another home in another part of the UK. If you spend at least an equal amount of time in your Scottish property as another UK home, then you will pay the Scottish rate.
You are obliged to let HMRC know of any change of address if you move to or from Scotland on or after the 6th April 2016. They can then calculate the correct amount of Income Tax straightaway.
Identifying which of two properties is your ‘main home’ can be a little tricky. On the surface of it, if you live there and most of your time is spent there, then it is your ‘main home’. This applies to somewhere that you live for free, rent or own.
If you don’t spend as much time there, a property can still be classed as your ‘main home’ if:
- you have memberships to societies or clubs there
- you are registered at that address for ‘official’ things like car insurance, bank accounts and your GP practice
- your family live there; ‘family’ here means those with a spouse or civil partner
- the majority of your belongings are at this address
These circumstances usually apply to taxpayers who work away from home for the majority of the time. For example, offshore workers, members of the armed forces and long-distance lorry drivers.
If you are still not sure how to classify you Scottish home, HMRC have many more details that cover every eventuality. Just get in touch with HMRC to check or to change which is your ‘main home’.
Students and the Scottish rate of tax
If your main home is in Scotland, you only pay the Scottish Rate of Income Tax on earnings over £11,000 (the Personal Allowance amount). Crucially, student loans are not classed as taxable income, so you are unlikely to earn enough to pay any Income Tax while you are studying.
How do I pay the Scottish Rate of Income Tax?
HMRC will write to inform you if they think you should be paying the Scottish Rate. If you don’t hear from them by the end of February, then you need to inform them by updating your address.
If your earnings are in the Basic Rate band and you are paying the Scottish Rate, your tax code will be S1100L. Your pension provider or employer will know to deduct the Scottish rate because ‘S’ will be added to the start of your tax code.
If you pay tax through the Self-Assessment scheme, there is a box on the 2016-17 return form in which you declare payment of the Scottish rate to HMRC.
