Thinking of moving to Scotland from another country in the UK? There are plenty of benefits to working or retiring in Scotland, not least the incredible landscapes and friendly people – but you should keep the tax differences in mind, too.
The Scottish Parliament has been deciding its own income tax bands and rates since 2017, which are separate from those applied in England, Wales, and Northern Ireland.
As a result, most Scottish taxpayers pay more income tax
than other taxpayers in the UK. With new tax changes coming in Scotland from 6th April 2024, it’s important to consider the tax cost before relocating to Scotland.
Income tax rates in Scotland
Those who live in Scotland pay income tax to the Scottish government on their wages, pensions, and other taxable income. The same tax on dividends and savings interest is applicable in Scotland as in the rest of the UK.
While Scotland also has a tax-free Personal Allowance
of £12,570 for annual earnings below £125,140, it has different tax rates with different thresholds than the tax bands used in England, Wales, and Northern Ireland.
Here are the 2024/2025 tax bands and rates in Scotland compared to the rest of the UK:
|
Tax Band |
Annual Income |
Scotland |
Rest of UK |
|
Scottish Starter Rate |
£12,571 – £14,732 |
19% |
|
|
UK Basic Rate |
£12,571 – £50,270 |
20% |
|
|
Scottish Basic Rate |
£14,733 – £25,688 |
20% |
|
|
Scottish Intermediate Rate |
£25,689 – £43,662 |
21% |
|
|
Scottish Higher Rate |
£43,663 – £75,000 |
42% |
|
|
UK Higher Rate |
£50,271 – £125,140 |
40% |
|
|
Scottish Advanced Rate |
£75,001 – £125,140 |
45% |
|
|
UK Additional Rate |
£125,140+ |
45% |
|
|
Scottish Top Rate |
£125,140+ |
48% |
Comparison to UK income tax rates
Scotland is introducing a new ‘Advanced’ tax rate from April 2024, which will charge 5% more than the tax bill for equivalent income in other UK countries.
As the Personal Allowance is tapered off on income between £100,000–£125,140, this income band will have a marginal rate of 67.5% compared to 60% elsewhere in the UK.
The Scottish ‘Top’ rate is also increasing from 47%
to 48% this year, compared to the highest rate being 45% in England, Wales, and Northern Ireland.
This means that the tax system in Scotland is tougher on earnings towards the top of the pay scale. For example, someone with an annual income of £100,000 moving to Scotland could see their tax bill increase by almost £3,350.
Towards the middle, someone earning £40,000 a year would see their tax go up by around £110. Whereas lower down the pay scale, someone earning £25,000 annually would be paying more or less the same basic rate.
Who is considered a Scottish taxpayer?
A person is liable for paying Scottish income tax if they live in Scotland full-time in their primary residence, live in Scotland part-time and stay at another home elsewhere in the UK the rest of the time, or do not have a permanent home but stay in Scotland regularly.
If you spend more time in Scotland than anywhere else during a tax year, even if your main residence is outside of Scotland, then you must pay tax in Scotland for that year.
It might be tricky to determine where your main address is if you have multiple homes – whether you own or rent them or live there for free – or if you travel frequently for work.
This is typically the address where you spend the most time and keep most of your possessions, the place where your family lives (if you have a spouse or civil partner), or the address you use for your accounts with financial or healthcare services.
If HMRC does not have the right address for you on record and you move to or from Scotland, you could be put on the wrong tax code and taxed at the wrong rate.
Get help with UK taxes
A guide to Scottish income tax is available on the government website, with more information on how the tax system works differently in Scotland.
Regardless of where they are in the UK, it’s essential for every earner to make sure they’re on the correct tax code for their income band and aware of how much tax they owe according to their current rate.
Of course, the last thing anyone needs when navigating a move across the UK is to misunderstand their tax situation – so if you need help managing your tax obligations when relocating to Scotland or anywhere else in the UK, get in touch with gbac.
We have a team of knowledgeable accountants in Barnsley who can advise you on UK tax matters – give us a call on 01226 298 298 or email info@gbac.co.uk
to learn more.