Scottish tax residence rules coming in

People living in Scotland will soon pay part of their income tax to the Scottish government, a move that could result in them paying a different rate of tax from other UK residents.

The main UK income tax rates for Scottish residents will be reduced by 10p from 6 April 2016 and a new Scottish rate of income tax will be added to the UK rate. For 2016/17 the proposed rate is 10p, in which case people in Scotland will pay the same rates as the rest of the UK.

In future, if the Scottish rate is set at 11p, for example, Scottish taxpayers would pay 21% basic rate, 41% higher rate and 46% additional rate tax. The Scottish rate will not apply to savings income, such as bank interest, or dividends, which will continue to be taxed at the UK rates.

Whether you are subject to the Scottish rate will normally depend on where you live. If you have homes in Scotland and elsewhere in the UK, or move in or out of Scotland during the year, it will normally be your main residence that determines whether you are a Scottish taxpayer.

If you cannot identify your main residence, you will be a Scottish taxpayer if you spend more days in Scotland than elsewhere in the UK. Scottish employees will have a tax code prefixed by an ‘S’ so that employers can deduct the correct amount of tax.

We can advise if you are not sure whether you or a family member qualify as a Scottish resident or on how the Scottish rates will affect you.