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Tax rates and allowances

Income taxes in Scotland

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Income taxes in Scotland

If you live in Scotland, you'll pay income tax under a slightly different system to the rest of the UK. We explain how the Scottish tax changes affect you. 

 

 

The 2017-18 tax year means that people in Scotland and the rest of the UK will be paying different taxes for the very first time.

This change comes as Scotland has been given new powers to control how much revenue it can generate.

And, in this article, Which? explains what those changes mean for you.   

  • Get a head start on your 2016-17 tax return with the Which? tax calculator. Tot up your tax bill, get tips on where to save and submit your return direct to HMRC with Which?.

The Scottish Rate of Income Tax

From April 2017, 10% of the tax Scottish residents pay on their income – called the Scottish Rate of Income Tax - will be sent directly to the Scottish government. Scottish residents will also pay a lower UK rate, but their overall tax rate will be the same as other residents in the UK.

For example, a basic-rate taxpayer living in Scotland would pay 10% in Scottish income tax and 10% in UK income tax, equal to the 20% basic-rate tax other UK residents pay.

In future, Holyrood might change the Scottish Rate of Income Tax, but under the devolved tax system, any reduction or increase to the basic rate must also apply to the higher and additional rate, and vice versa.

 

Scottish tax rates 2017/18
Tax rate

Scottish rate of 

income tax

UK rate paid

in Scotland

Overall income

tax rate

Basic rate (20%) 10% 10% 20%
Higher rate (40%) 10% 30% 40%
Additional rate (45%) 10% 35% 45%

Scottish income tax bands

Scotland also has the power to set the limits at which you become a higher- or additional-rate taxpayer, though the tax-free personal allowance will still be set in Westminster.   

In 2017-18, the tax-free personal allowance is £11,500 rising from £11,000 in 2016-17, equivalent to a £100 tax cut for the vast majority of people earning £11,500 or more.

In 2017-18, the higher rate threshold remains at £43,000 in Scotland, while in the rest of the UK it is £45,000.

This freeze means an estimated 400,000 higher-rate taxpayers in Scotland will pay up to £400 more than they would have done in the rest of the UK.

Scottish income tax bands from April 2017
Tax rate

2016 / 17

Scotland

2017 / 18 

Scotland

2017 / 18

rest of UK

Personal allowance £0 - £11,000 £0 - £11,500 £0 - £11,500
Basic rate £11,001 - £43,000 £11,501 - £43,000 £11,501 - £45,000
Higher rate £43,001 - £150,000 £43,001 - £150,000 £45,001 - £150,000
Additional rate £150,001+ £150,001+ £150,001+

Who pays the Scottish Rate of Income Tax?

If your main home is in Scotland, you will pay the Scottish Rate of Income Tax. If you move homes, either to or from Scotland, you will pay the Scottish Rate if you live in Scotland for more than half of the year.

Taxes for people with multiple properties depend on your main home, where you live and spend most of your time.

Your main home might be one where you spend less time if:

  • That’s where your family lives, if you are married or in a civil partnership
  • That’s where most of your property is
  • That’s where you’ve registered for things such as your GP, car insurance or your bank account

How to pay the Scottish Rate of Income Tax

If you complete your own self-assessment tax return, there will be a box on your tax return to indicate you pay the Scottish rate. If you pay taxes on earnings or a pension through a Pay as You Earn scheme, your tax code will begin with an S.

Find out more: Understanding your tax code - understand how much you will earn before paying tax

  • Last updated: April 2017
  • Updated by: Gareth Shaw
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