Is income tax in Scotland different?
People in Scotland have been paying different taxes to the rest of the UK since the 2017-18 tax year.
This change comes as Scotland has been given new powers to control how much revenue it can generate.
In this article, Which? explains what those changes mean for you.
- Get a head start on your 2017-18 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?.
What are the Scottish tax bands and rates in 2018-19?
The Scottish Rate of Income Tax changed in April 2018.
The table below outlines the Scottish rates and bands for the 2018-19 tax year.
| Tax rate | Earnings | Rates |
|---|---|---|
| Starter rate
| Over £11,850 to £13,850 | 19% |
| Basic rate | Over £13,850 to £24,000 | 20% |
| Intermediate rate | Over £24,000 to £43,430 | 21% |
| Higher rate
| Over £43,430 to £150,000 | 41% |
| Top rate
| Above £150,000 | 46% |
Note: the personal allowance of £11,850 reduces by £1 for every £2 earned over £100,000.
Under these new tax bands, it's claimed that 55% of Scottish taxpayers pay less than if they were to live elsewhere in the UK, and 70% pay less than they did in 2017-18.
The changes mainly benefit lower earners.
Due to the introduction of the new Starter Rate band, along with the increase in personal allowance throughout the UK (which is £11,850), the Scottish government states that every Scottish taxpayer earning less than £33,000 in 2018-19 pays less income tax than they did in 2017-18, for a given level of income.
Higher earners, however, have a 1% increase to their income tax bill, and those earning more than £100,000 also have their personal allowance reduced by £1 for every £2 earned over £100,000.
This means that someone earning £110,000 has their Personal Allowance reduced by £5,000, bringing it down to £6,850. They are therefore liable to pay tax on a larger proportion of their income, as well as paying at a higher tax rate.
Use our income tax calculator for 2018-19
Find out how much income tax you'll pay in Scotland using our calculator. Simply flip the tab to Scotland and select the tax year you'd like to calculate.
Scottish Rate of Income Tax 2019-20
In the Scottish Budget in December 2018, the government proposed raising the thresholds for the basic and intermediate rates. The UK personal allowance will also increase in line with changes announced by Westminster in October 2018.
The changes to the basic and intermediate rate will need to be approved by parliament. If successful, the new thresholds will take effect from April 2019. The rates you pay will remain unchanged.
The table below sets out the tax bands for 2019-20 in Scotland.
| Tax rate | Earnings | Rates |
|---|---|---|
| Starter rate
| Over £12,500 to £14,549 | 19% |
| Basic rate | Over £14,549 to £24,944 | 20% |
| Intermediate rate | Over £24,944 to £43,430 | 21% |
| Higher rate
| Over £43,430 to £150,000 | 41% |
| Top rate
| Above £150,000 | 46% |
Note: the personal allowance of £11,850 reduces by £1 for every £2 earned over £100,000.
Scottish Rate of Income Tax 2017-18
Last tax year, 10% of the tax Scottish residents paid on their income – called the Scottish Rate of Income Tax - was sent directly to the Scottish government.
Scottish residents also paid a lower UK rate, but their overall tax rate was the same as other residents in the UK
| 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% |
Who pays Scottish tax rates?
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 are dependant on your main home, where you live and where 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 do I pay income tax in Scotland?
If you complete your own self-assessment tax return, there will be a box on your tax return you need to select to indicate that you pay the Scottish rate.
If you pay taxes on earnings or a pension through a Pay As You Earn scheme (PAYE), your tax code will begin with an S.
Find out more: Understanding your tax code - understand how much you will earn before paying tax.
