Living in Scotland could cost you more tax
Introduction to Scottish income tax
Do you know that Scottish tax rates are different from the rest of the UK? If you live in Scotland you are probably going to be paying more tax than someone earning the same amount but living in England.
The Scottish Parliament sets Scottish income tax rates and bands although HMRC will continue to be responsible for tax collection and management. Therefore Scottish income tax remains part of the existing UK income tax system and is not a devolved tax.
The Scotland Act 2016 provides the Scottish Parliament with the power to set all income tax rates and bands (except the personal allowance, which remains reserved) that will apply to Scottish taxpayers’ non-savings, non-dividend (NSND) income for tax year 2018/19.
Scottish income tax is only payable by Scottish taxpayers. In general terms you will pay Scottish Tax if you are tax resident in Scotland – something your accountants should be able to advise you on.
The Scottish rates and bands for 2018/19
| Bands | Band name | Rates (%) |
| Over £11,850-£13,850 | Starter Rate | 19 |
| Over £13,850-£24,000 | Basic Rate | 20 |
| Over £24,000-£43,430 | Intermediate Rate | 21 |
| Over £43,430-£150,000 | Higher Rate | 41 |
| Above £150,000 | Top Rate | 46 |
This compares with what is a comparatively simpler structure for those living “south of the border”:
| Bands | Band name | Rates (%) |
| Over £11,850 – £46,350 | Basic rate | 20 |
| Over £46,350 – £150,000 | Higher rate | 40 |
| Above £150,000 | Additional Rate | 45 |
Both tables:
Assume the taxpayer is in receipt of the Standard UK Personal Allowance of £11,850
Personal Allowances are reduced by £1 for every £2 earned over £100,000
Have a look at these comparisons:
Salary £15,000 – pay £20 less tax in Scotland
Salary < £26,000 – pay less tax in Scotland
Salary of £26,000 – pay the same tax
Salary of £33,000 – pay an extra £70 in Scotland
Salary of £45,000 – pay an extra £504 in Scotland
Salary of £100,000 – pay an extra £1,324 in Scotland
Salary of £150,000 – pay an extra £1,942 in Scotland
However, if you are in business and extract your profits taking a low salary and high dividend, then there is virtually no difference between Scotland and the rest of the UK. That is because dividend tax rates are the same throughout the UK.
Therefore for most taxpayers that remains the most efficient way of “drawing” money from your business if you operate through a limited company – whether in Scotland, or the rest of the UK..
For further advice existing clients email us at support@anytime.uk.com or call 03333 110 230
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