Income tax for Scottish taxpayers is set to change significantly from 6 April 2018, as their earnings, pensions and profits will be subject to up to five rates of Scottish income tax.
The thresholds for various Scottish tax rates don’t align with the thresholds for national insurance contributions (NIC).
The resulting tax and NIC bands for 2018-19 are shown in the table. The effective rate between £100,000 and £123,700 arises due to the withdrawal of the personal allowance where income exceeds £100,000.
You are classified as a Scottish taxpayer if your main home is in Scotland, in which case you should have a PAYE code that starts with ‘S’. If you are a Scottish taxpayer who is self- employed, you will pay the Scottish tax rates shown in the table plus NIC of 9% instead of 12%.
Tax relief on pension contributions will continue to be given at 20%, even for Scottish taxpayers who pay tax at only 19%. Any additional tax relief at 21% or higher rates will have to be claimed in your tax return or by contacting HMRC.
Scottish taxpayers who receive significant amounts of dividends or interest in 2018-19 will have to reperform their tax calculations using the tax bands and rates which apply for the rest of the UK. Our tax return software will undertake that calculation for you on submission of your return.