Scottish Income Tax changes in April 2016

The Scottish rate of Income Tax (SRIT), introduced by the Scotland Act 2012, gives the Scottish Parliament the power to set a Scottish rate of income tax and to raise taxes on land transactions. The SRIT will be charged on the non-savings and non-dividend income of those defined as Scottish taxpayers and will start from April 2016.

The income tax rates set by Westminster will be reduced by 10p in the pound for Scotland, leaving Holyrood to set its own rate to generate its own income. The Scottish rate of income tax could be set at 10p, leaving the levy unchanged, but there is no upper limit on the rate and it could also be cut to zero - the Scottish Parliament will decide.

So, from 6 April 2016, you may pay a different rate of Income Tax to the rest of the UK if you live in Scotland. This means how much tax you pay on your wages, pension and most other taxable income may change. Your Personal Allowance - the amount of income you don’t pay tax on - stays the same. You’ll also pay the same tax as the rest of the UK on dividends and savings interest.

The rate for Scotland is due to be announced shortly and HMRC will issue PAYE codes with ‘S’ prefixes (for Scottish tax payers) before 6 April 2016.


Who pays the Scottish rate?

Basically, you’ll pay the Scottish rate if you live in Scotland.

The definition of a Scottish taxpayer is focused on where an individual lives, or resides, in the course of a tax year. Scottish taxpayer status applies for a whole tax year - it’s not possible to be a Scottish taxpayer for part of a tax year.

For the vast majority of individuals, the question of whether or not they’re a Scottish taxpayer will be a simple one – they will either live in Scotland and be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer.

You’ll need to work out if you’ll pay the Scottish rate if you do any of the following from April 2016:

1. Move to or from Scotland

You must tell HMRC of your new address if you move to or from Scotland. You may pay tax at the wrong rate if you don’t. Your employer can’t tell HMRC on your behalf.

2. Live in a home in Scotland and one elsewhere in the UK, e.g. for work

Your main home is usually where you live and spend most of your time. It doesn’t matter whether you own it, rent it or live in it for free. Your main home may even be the home where you spend less time if that’s where:

  • Most of your possessions are
  • Your family lives, if you’re married or in a civil partnership
  • You’re registered for things like your bank account, GP or car insurance
  • You’re a member of clubs or societies

This might apply to you if you live away because of your work, e.g. you’re a lorry driver, an offshore worker or in the armed forces.

3. You don’t have a home and you stay in Scotland regularly, e.g. you stay offshore or in hotels

You must work out whether you’re a Scottish taxpayer or not by counting the number of days you spend in Scotland and comparing it to the number of days you spend elsewhere in the UK during a tax year.

If you spend more days in Scotland than elsewhere in the UK, you’re a Scottish taxpayer for the whole tax year.

Further information on this subject is available at the Scottish Parliament website.

If you would like to receive specialist tax advice, please contact us here.


Image by Alan Cleaver

Stuart Beaty

Celsium, Birmingham, UK