Corporate Tax Advisory

On 6 April 2018, Scottish taxpayers became subject to new income tax rates and bands. These new rates and bands represent a radical change from those that exist in the rest of the UK. You may now be asking yourself ‘Am I a Scottish taxpayer?’

The Position Before 6 April 2018

Taxpayers in Scotland have been paying Scottish income tax on their non-savings, non-dividend income, instead of UK income tax, since April 2017.

For the 2017/18 tax year, the tax rates and bands in Scotland are the same as those in the rest of the UK, albeit the threshold at which the higher rate of income tax starts to be payable is lower than in the rest of the UK.

Therefore, unless you are a higher rate taxpayer, you wont be paying any more or any less tax as a Scottish taxpayer than you would if you were a taxpayer in the rest of the UK. Indeed, so minor is the impact on the majority of Scottish taxpayers, you may not even know whether or not you are a Scottish taxpayer.

However, with the Scottish Government predicting that the new rates and bands for the 2018/19 tax year will result in 55% of Scottish taxpayers paying less compared to the rest of the UK, and 45% of Scottish taxpayers paying more, the question ‘Am I Scottish Taxpayer?’ becomes more focused.

Am I a Scottish Taxpayer?

Ask yourself the questions below to find out.

Am I an individual resident in the UK for tax purposes?

Only individuals are subject to Scottish income tax. Non-individuals, such as companies and trusts, are not subject to the tax.

Scottish taxpayers must be resident in the UK for tax purposes, as determined by HMRC’s Statutory Residence Test. In the simplest terms, if you spend more than 183 days in the UK in a given tax year, you will normally be considered a UK resident.

Do I have a ‘close connection’ to Scotland?

If you have only one place of residence within a tax year, and this is in Scotland, you are a Scottish taxpayer. Your national identity and location of work are not relevant.

If you have more than one place of residence at the same time within a tax year (for example, you own a house in London and another in Edinburgh), you must identify your main residence. If your main residence is in Scotland, you are a Scottish taxpayer.

If you have more than one main residence at different points within a tax year (for example, you have relocated from Bristol to Glasgow), and you have had your main residence in Scotland for at least as much of the tax year as any other part of the UK (meaning, individually, England, Wales or Northern Ireland), you are a Scottish taxpayer.

Identifying your main residence is a question of fact, which depends on all the circumstances. It is not necessarily the residence at which you spend most of your time. Relevant factors include:

  • Location of spouse, partner or children.
  • Membership of clubs.
  • Address to which a driving licence is registered.
  • Address to which bank accounts and credit cards are linked with.
  • Registration at an address with a doctor.
  • Registration at an address to vote.

No one factor is determinative and the weight of all the factors must be considered.

See HMRC’s guidance for useful examples regarding place of residence.

Have I spent at least as many days in Scotland as in any other part of the UK?

This question is only relevant if you do not have a close connection with Scotland (either because you cannot identify any place or residence or a main residence).

If you do not have a close connection with Scotland, but have spent at least as many days in Scotland as you have elsewhere in the UK (meaning the total number of days spent in England, Wales and Northern Ireland), you are a Scottish taxpayer.

Am I a Scottish parliamentarian?

Even if you do not have a close connection to Scotland and spend more time elsewhere in the UK, you are automatically a Scottish taxpayer if you are a Scottish parliamentarian in a given tax year (meaning you are either an MP for a Scottish constituency, an MSP or an MEP for Scotland).

What do I need to do now?

If you are employed or receive a pension, you should ensure that you have the correct tax code. If you are a Scottish taxpayer, your tax code will start with an ‘S’. You can check your tax code by looking at your payslip or contacting your employer or pension provider.

If you fill in a self-assessment tax return, you will need to inform HMRC that you pay Scottish income tax by ticking the relevant box in the return.

For further information or advice on the changes to the Scottish tax rates and band, please contact us.

Heather Gibson

Associate at Brodies LLP
Heather is an Associate in the Corporate Tax Team. She has a broad corporate practice which includes acquisitions, investments and reorganisations of companies, VAT, SDLT/ LBTT implications of property investments and worker/ employee matters ranging from incentives and termination issues to IR35 and CIS.
Heather Gibson

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