Scottish Rate of Income Tax

07 December 2015

From 6 April 2016, the Scottish Parliament will have the power to set its own rate of income tax. Who it will apply to and how it will be implemented?

On 2 December 2015, HMRC began to contact customers living in Scotland where their records show that this is their main address, to inform them they have been identified as being a Scottish taxpayer. Employees receiving these letters are likely to turn to their payroll department if they have questions. All employers need to know the basics about the Scottish Rate of Income Tax:

  • Scottish taxpayers will have a tax code prefixed by an ‘S’. Scottish tax codes will be issued as part of the annual coding routines to employers, so the correct rate of income tax can be deducted based on each individual’s taxpayer status.
  • If any of your employees live in Scotland you will be sent the ‘S’ Tax code in the annual coding run.
  • You must ensure that your payroll software is up to date and able to apply the new ‘S’ codes.
  • You will need to apply the new ‘S’ tax code to all employees identified as being a Scottish taxpayer even if the rates of Income Tax in Scotland remain the same as the rest of the UK.
  • There will be no change to the way you report or make payments for income tax to HMRC, other than applying the ‘S’ tax code to Scottish taxpayer employees.
  • You do not need to take any action to identify whether any of your employees are Scottish taxpayers, as this will be done by HMRC using the address information held on our records.
  • Please encourage your employees to tell HMRC if their address changes, to enable us to correctly identify any Scottish taxpayers and ensure they pay the right amount of tax.
  • The tax tables will be updated on GOV.UK in February 2016 to show the Scottish rates of Income Tax for basic, additional and higher rate taxpayers.

Updates and all the latest information are available on GOV.UK’s Scottish rate of Income Tax news page.

Technical guidance for Scottish Rate of Income Tax was published in early November and previous articles published in CIPP News On Line can be found in the CIPP’s Policy News Journal.

Financial plans for the Scottish Government are due to be announced on 16 December 2015 so watch our news pages for an announcement of what they are planning to set the Scottish rate at come April next year.