What’s changing?

On 14 December 2017 the Scottish Government announced new Income Tax rates and allowances for Scottish taxpayers to apply for 2018/2019 tax year.

The following tax bands for people who live in Scotland will be:

  • Starter rate
  • Basic rate
  • Intermediate rate
  • Higher rate
  • Top rate

These rates and allowances are different to the rates and allowances for the rest of the UK.

What are the new Income Tax rates?

For the tax year 2018/2019, the new rates are as follows:

Income Tax band Earnings bracket New rate in Scotland

Starter rate

£11,850 - £13,850

19%

Basic rate

£13,851 - £24,000

20%

Intermediate rate

£24,001 - £43,430

21%

Higher rate

£43,431 - £150,000

41%

Top rate

£150,001+

46%

The tax bands shown assume that you are in receipt of the full personal allowance. For every £2 of income over £100,000, this allowance is reduced by £1.

The Scottish Parliament agreed these rates and thresholds on 20 February 2018, and they are due to apply from 6 April 2018.

Who’ll be affected?

Only Scottish income taxpayers will be affected by this change. Other UK income taxpayers will not be affected.

How will I know if I am a Scottish income taxpayer?

This is based on your residency and is determined by HMRC. If HMRC have identified that the Scottish income tax rates and bands apply to you, they will have to let you know. If you move to Scotland or out of Scotland then you should let HMRC know your new address as soon as possible. You can do this here.

What does this mean for my pension tax relief?

For pensions that add tax relief to your personal contributions, such as Personal Pension and SIPPs, the amount of pension tax relief that you receive can depend on how much you contribute to your pension and on your rate of Income tax.

If you’re a Scottish taxpayer who gets tax relief on your pension savings, the following information explains what the changes to the rates and allowances mean for you.

Scottish starter rate

If you live in Scotland and you pay the Scottish starter rate of Income Tax at 19%, the Government will still give you tax relief at 20% into your pension plan and HMRC won’t ask you to repay the difference. So you don’t need to take any action or pay anything back to HMRC relating to pension tax relief.

Basic rate

As a basic rate taxpayer, the Government will continue to give you tax relief at the basic rate of 20%.

They will do this for everyone so it doesn’t matter where you live as you’ll receive 20% tax relief directly into your pension plan.

Scottish intermediate rate

If you live in Scotland and you pay the Scottish intermediate rate of Income Tax at 21%, the Government will automatically give you tax relief at 20%.

As you’re entitled to an additional 1% of tax relief on your pension contributions, you’ll be able to claim this from HMRC. They won’t be able to put this into your pension but they will adjust your tax code so that you get this tax relief through your pay. You can claim this by contacting HMRC if you do not already complete Self-Assessment returns. If you do, you can claim this through your Self-Assessment Tax return.

Higher or top rate

If you pay higher or top rate of Income Tax, you can continue to claim this additional tax relief from HMRC as you do now in your Self-Assessment Tax return or by contacting HMRC. You can do this whether you live in Scotland or elsewhere in the UK.

Are there any exceptions to this?

Certain types of savings income, such as fund distributions, company dividends and interest, remain subject to UK wide taxation and have not been devolved to Scotland. For these types of income the standard UK allowances, bands and tax rates will still apply. Further details can be obtained from HMRC here.

Need more information?