Personal tax in Scotland

This information only applies in Scotland.

For those who are self-employed or who employ others in the course of their business, having an understanding of personal taxation is hugely important.

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What is income tax?

Income tax is the tax paid on many different types of income. You pay income tax on things such as:

  • money earned through your job
  • profits you make through being self-employed
  • some state benefits
  • pensions
  • money made from renting out a property or a room in a house
  • income from a trust
  • interest earned from savings (if this is over a certain amount)

If you live in Scotland, you pay Scottish Income Tax. This money goes to the Scottish Government.

What are the rates of income tax?

You pay different rates of income tax depending on how much you earn. The different rates paid on different levels of earning are called ‘tax bands'. The current tax bands are:

  • personal allowance (up to £11,850) – 0%
  • starter rate (£11,850 to £13,850) – 19%
  • basic rate (£13,851 to £24,000) – 20%
  • intermediate rate (£24,001 to £43,430) – 21%
  • higher rate (£43,431 to £150,000) – 41%
  • top rate (over £150,000) – 46%

Who pays income tax in Scotland?

Everyone who lives permanently in Scotland pays Scottish Income Tax.

You might also have to pay it if you have moved and spent over half the tax year living in Scotland.

If you have a house in Scotland and a house somewhere else, you may be liable for paying tax in Scotland. This will depend on which is considered your main home. Your main home will be the one that you usually live at and spend the majority of your time.

You may have to pay income tax in Scotland if you don't have a home here but stay here on a regular basis. For example, you might work and stay offshore or in hotels.

How is income tax paid?

If you have an employer or receive a pension, you will have a tax code that tells your employer or pension provider the rate at which they should deduct tax from your income. Other people will pay tax by filling out a Self Assessment tax return.

PAYE

PAYE is the system used by HM Revenue & Customs to collect income tax and national insurance from employers. To make this possible, employers are required to operate PAYE as part of their payroll and make deductions for tax, national insurance, student loan repayments and pensions contributions. These deductions need to be reported to HMRC on or before each payday. Payments are then made to HMRC, usually once a month.

Self Assessment

Income tax is collected from those who are self-employed or who have sources of income other than from an employer or pension through Self Assessment. You will be responsible for paying the income tax and national insurance contributions that would otherwise be paid through your employer or pension provider. This can be done online or in paper form but must be completed before the relevant deadlines. For the tax year 2017/18, these deadlines are:

  • registration for Self Assessment – 5 October 2018
  • paper tax return – midnight 31 October 2018
  • online tax returns – midnight 31 January 2019
  • tax paid – midnight 31 January 2019
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