10 October 2015    |    Taxation

Scottish Rate of Income Tax

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Scottish tax and your employees

The Scottish rate of income tax (SRIT) comes into force on 6 April 2016. As an employer how might it affect you?
New rules. Some Scottish taxpayers will pay less tax from 6 April 2016 regardless of where their job is based in the UK. If you’re an employer this might mean using a new type of tax code for Scottish employees on your payroll in 2016/17 and later years.
Scottish taxpayers. The new tax codes apply to individuals who have Scottish taxpayer status. This is anyone whose main home is in Scotland (rather than anywhere else in the UK) for a greater part of the tax year.
Who decides? Employers won’t be required to determine whether one of their workers has Scottish taxpayer status, that’s up to HMRC. However it is asking employers to ensure they keep their payroll records up to date with changes in their employees’ addresses to help assess their status.
Your responsibilities. Where HMRC decides one of your staff has Scottish taxpayer status you will be sent a special tax code to use. This will be apparent as it will be prefixed with an “S”. This will change the rate of tax the employee pays. Initially the Scottish rate of income tax will be 2% less than for other UK workers. As long as you update your payroll software for the start of 2016/17 it will take care of the calculations.
Movers. Employees can attain or lose their Scottish taxpayer status during a tax year. Where this happens their new status applies for the whole year. Where HMRC becomes aware of a change in status it will issue or withdraw an S-code. Any refund resulting from a change of code will be made through the PAYE system. Conversely, where an employee loses their Scottish taxpayer status, HMRC will recover the extra tax due direct after the end of the tax year (see The next step ).
The next step
For a link to more information on the SRIT, visit http://tipsandadvice-tax.co.uk/download (TX 16.01.01).
The SRIT will affect those with Scottish taxpayer status. HMRC will decide who it applies to and issue a tax code prefixed by “S”. If you receive one, enter it into your payroll software. No other action is required.


The information provided is for general information purposes only.

Legislation and details may have changed since this was written.  The text may not include all matters that are relevant to your individual situation.

You should not make decisions, or refrain from making decisions, without taking further professional advice about your specific circumstances.

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