What is the Scottish rate of Income Tax?

Definition of the Scottish rate of Income Tax

The Scottish government can now set Income Tax rates and bands for taxpayers who live in Scotland. This is known as the Scottish rate of Income Tax.

How the Scottish rate of Income Tax is calculated

For the tax year 2017/18, the rate of Income Tax in Scotland is the same the rest of the UK. However, it is calculated differently.

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Starting with the basic rate of tax, 20%, the UK government deducts 10% and the Scottish government adds its own amount back on (at the moment this is 10%). In effect, Scottish basic rate taxpayers pay 10% to the UK government and 10% to the Scottish government.

At the moment, these deductions and additions are the same for all Income Tax rates:

Tax rate UK rate of Income Tax UK government deduction Scottish government addition Scottish rate of Income Tax
Basic rate 20% 10% 10% 20%
Higher rate 40% 10% 10% 40%
Additional rate 45% 10% 10% 45%

The threshold for the higher rate of tax in Scotland

For the tax year 2017/18, a higher-rate Scottish taxpayer will pay more tax, because the Scottish higher rate tax band is lower than that in the rest of the UK. Scottish taxpayers pay higher-rate tax once their income goes over £43,000 - but for an English, Welsh or Northern Irish taxpayer, the threshold is £45,000.

Who qualifies as a “Scottish taxpayer”?

A Scottish taxpayer is a taxpayer who lives in Scotland. If you live in England you’ll be an English taxpayer, even if you work for a Scottish employer.

Scottish taxpayers have an ‘S’ at the start of their tax code, for example, S1150L for the 2017/18 tax year, whereas in the rest of the UK the corresponding code is 1150L.

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