If you live in Scotland, you’ll pay a different rate of tax, called the ‘Scottish rate of Income Tax’. Scottish Income Tax applies to your wages, pension and most other taxable income. You’ll still pay the same rate of tax on dividend income and savings interest as the rest of the UK.
How do I know if I need to pay Scottish Income Tax?
Scottish Income Tax is only payable by taxpayers whose main home is in Scotland.
Her Majesty’s Revenue and Customs (HMRC) will determine whether you’re a Scottish taxpayer based on where your main place of residence is.
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.
If you live anywhere else in the UK, you won’t pay Scottish Income Tax.
If you move to or from Scotland during the tax year, you’ll be a Scottish taxpayer if you live in Scotland for at least as much of the tax year as you live in any other country in the UK.
How does the Scottish Income Tax work?
The Income Tax rates and bands payable by Scottish taxpayers are set by the Scottish Parliament.
The tax system is based on marginal tax rates. That means it’s worked out as a percentage of income you earn inside certain thresholds – you don’t pay the same rate of tax on everything you earn.
As your income increases, so too does the amount of Income Tax you pay.
The money collected from Scottish Income Tax will be taken by HMRC and paid to the Scottish Government.
How much Income Tax will I pay?
The table below shows the rate of Income Tax you pay on your income.
The Scottish rates and bands for 2020-21
||Income band 2019-20
||Income band 2020-21
||Up to and including £12,500
||Up to and including £12,500*
* Assumes you’re getting the Standard UK Personal Allowance of £12,500 which will also apply to Scotland.
** The Personal Allowance of £12,500 is reduced by £1 for every £2 on income over £100,000. Anyone with income that exceeds £125,000 will not have a personal allowance.
For example, if you earn £45,000 a year, you pay:
- nothing on the first £12,500
- 19% (£491.15) on the next £2,585
- 20% (£2,114.60) on the next £10,573
- 21% (£3,837.12) on the next £18,272
- 41% (£643.70) on the next £1,570.
If you think you might have had Income Tax wrongly taken from your earnings, fill in the form from HMRC to have it paid back to you.
What is my Scottish Tax code?
Your tax code will start with an ‘S’ if you’re a Scottish taxpayer.
Your tax code is normally the amount you can earn without paying tax, divided by 10, with a letter added.
Tax code: S1250L
1250 becomes £12,500 earned before tax.
To make sure you’re on the right tax code, check your code matches the Personal Allowance you should be getting.
If you think your tax code is wrong, or if you’re in any doubt, contact HMRC.
It’s important you give HMRC all the information it asks for so you don’t end up on the wrong tax code and pay too much or too little tax.
*** Lines are open Monday to Friday, 8am to 8pm, Saturday 8am to 4pm, Sunday 9am to 5pm. Call charges apply, find out more on GOV.UK.
National Insurance contributions rates will remain the same in Scotland and in line with the rest of the UK.
National Insurance contributions help build your entitlement to certain state benefits, such as the State Pension and Maternity Allowance.
You begin paying National Insurance once you earn more than £183 a week (this is the amount for the 2020-21 tax year).
The National Insurance rate you pay depends on how much you earn:
- 12% of your weekly earnings between £183 and £962
- 2% of your weekly earnings above £962.
Your National Insurance contributions will be taken off along with Income Tax before your employer pays your wages.
Class 3 voluntary contributions
Class 3, flat rate voluntary national insurance contributions are payable at a rate of £15.30 per week for 2020-21.
You would decide to pay them to make sure you got an entitlement to a basic retirement pension (the State Pension) and to maintain your full National Insurance contribution record and Bereavement Benefit.
From April 2018 this was expanded, so paying Class 3 contributions would also go towards giving you access to the standard rate of Maternity Allowance and contributory Employment and Support Allowance for the self-employed.
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