New Scottish Tax Rates

In April there will be new Scottish tax rates in force. These separate rates of income tax will apply to you if you live in Scotland. As well as the Scottish basic income tax rates, the Scottish parliament has the power to also set (and name) other Scottish rates. These rates are fully devolved: that is, Scottish taxpayers pay tax on any applicable income at the Scottish rates only, and not subject to rates applicable elsewhere in the UK (which continue to be set by the UK parliament).

The various Scottish income tax rates do not apply to the following:

– savings income
– dividend income, and
– non-residents on the remittance basis

Are you a Scottish tax rate payer?

The definition of a Scottish taxpayer is based on the individual’s main place of residence. If your only or main residence for a given tax year is in Scotland, then you are going to be a Scottish taxpayer. If you have more than one main residence, the one which was used for the longest period in the year determines your status. If you haves no main residence, it is necessary to count the number of days spent in Scotland and elsewhere in the UK. By definition, a non-resident cannot be a Scottish taxpayer.

The new Scottish tax rates

2018/19 Scottish income tax rates and bands have been published in respect of Scottish taxpayers, as shown in the table below, leading to further complexity even for those with relatively modest incomes.

As the higher rates of tax increasingly hit Scottish taxpayers differently to their non-Scottish counterparts, it is particularly important that:

– HMRC is informed of any change of address which affects residence; and
– individuals changing residence check any tax calculations very carefully.

	Rate	Income limits 2018/19 £
Starting rate	19%	11,850 to 13,850
Basic rate	20%	13,851 to 24,000
Intermediate rate	21%	24,001 to 44,272
Higher rate	41%	44,273 to 150,000
Top rate	46%	>150,000

Scottish Budget, 14 December 2017

From 6 April 2018, the Scottish higher rate income tax threshold, at which tax will be payable at a rate of 41%, is destined to be £43,430 (announced originally at £44,273).

Scottish Government web posting, 31 January 2018

Crunchers – Accountants Edinburgh