Newsletter Spring 2017

Scottish residents pay more tax

From 6 April 2017 the basic rate (20%) Income Tax band will be smaller for Scottish taxpayers than for taxpayers who live in the rest of the UK. The rates of Income Tax and National Insurance (NIC) are not changing, but there will be differences at the margin between 20% and 40% tax when NI is taken into account – see table.

As the Scottish Parliament has no control over NI the class 1 NIC and class 4 NIC thresholds will be out of line with the 40% Income Tax threshold in Scotland. This means that Scottish taxpayers will pay 52% (40% tax + 12% NIC) on employment income between £43,000 and £45,000.

A Scottish taxpayer is an individual whose main home is in Scotland, but Scottish MPs and SMPs are regarded as Scottish taxpayers, wherever they live. It doesn’t matter where the individual’s employer is based, or where the taxpayer works. All Scottish taxpayers who are taxed under PAYE should have received a new tax code with an 'S' prefix to allow their employer to deduct the correct tax from their salary or pension.

HMRC have assumed the taxpayer’s main home is their correspondence address. If you have a Scottish address, but don’t consider that to be your main home, you should update your address details with HMRC without delay.

2017/18 Scottish taxpayers Rest of UK taxpayers
Personal allowance £11,500 £11,500
20% tax band 31,500 33,500
40% tax applies above: 43,000 45,000
12% Class 1 NIC applies to: 45,000 45,000