15 December 2016    |    Taxation

Scottish Tax rates differ from the rest of the UK

In the Scottish Budget today, Finance Secretary Derek MacKay set the Scottish Tax levels.  He announced that the higher rate tax band for individuals resident in Scotland would not increase by as much as that in the rest of the UK.

This is part of the devolution settlement which allows the Scottish Parliament to vary Income Tax Rates and income tax bands.  Until now these powers have never been used, but as a result of today’s announcement there will be a limited divergence between Scotland and the rest of the UK.



,All UK,Scotland,Rest of the UK

Personal allowance,”11,000″,”11,500″,”11,500″

Savings rate (tax free),”5,000″,”5,000″,”5,000″

Basic rate band (20%),”32,000″,”32,930″,”33,500″

Higher rate applies on income above,”43,000″,”43,430″,”45,000″


There are no other differences, so as a result of today’s announcement, Scottish Tax Payers will pay 40% tax on £1,570 of income on which taxpayers in the rest of the UK pay tax at 20%.

HM Revenue & Customs manage Scottish TaxScottish Tax Payers are identified by having the prefix S added to their tax coding, and all residents of Scotland are – by default – taxed at Scottish rates via the Inland Revenue computers.  All Parliamentarians representing Scottish constituencies are automatically treated as Scottish taxpayers too.  Administration of income tax remains with HMRC who will deal with all employers and all employees on all tax matters.

Employers need to ensure that their payroll systems can cope with Scottish Tax rates and that they have correctly identified Scottish taxpayers, but as reporting remains unchanged, there should be only a limited impact on payroll administration.

Whether this proposal is finally passed by the Parliament, where the ruling SNP are in a minority, remains unclear; but this is where we stand at present.

Nicolson Accountancy have strategies in place to help taxpayers who may be affected by this, and if you want more information please contact Angus Nicolson today, or visit our BACS bureau sister company Payroll Scotland.


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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