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Scottish Taxpayers

Taxes and pension relief for Scottish Taxpayers differ from the rest of the UK, with a more complex structure. We’ll confirm if you should be a Scottish Taxpayer and advise on how to be tax-efficient and compliant. 

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  • Jill Walker
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    The team

  • Entrepreneurs. High Net Worth Individuals. International Private clients. 

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  • Personal Tax. Tax Compliance. Tax Planning. Charitable Giving. Tax Residence and Domicile. Property Tax. Partnerships. Trust Planning and Family Investment Companies. International Private Client Tax. 

    How we can help

HOW SCOTTISH TAX DIFFERS

Scottish income tax came into force on 6 April 2017, with a five-band structure made up of starter, intermediate, basic, higher and top tax rates. This applies to earnings, rental income, pensions and most other taxable income. However, Scottish taxpayers will continue to pay the same as the rest of the UK on dividends and savings income. 

We can help you navigate these complexities and assist with reviewing Scottish Tax coding notifications, claiming additional tax relief in respect of pension contributions and advising gift aid and marriage allowance tax savings. 

ARE YOU A SCOTTISH TAXPAYER?

First, we’ll identify your residency status to determine if you meet the relevant criteria to be considered a Scottish Taxpayer. This depends on where you live for a complete tax year, as defined by the UK Statutory Residence Test. Generally, you can’t be a Scottish taxpayer for part of the year and a non-Scottish taxpayer for the rest, although if you live outside the UK entirely for part of the year, you may be entitled to split year treatment. 

At its simplest definition, if you live in Scotland you’re a Scottish taxpayer. If you’re employed and taxed under PAYE, HMRC will decide for you (although you can appeal). Your PAYE code will have an S prefix. If you pay tax via Self-Assessment, you’ll have to decide whether or not you’re a Scottish taxpayer. 

HOW YOUR STATUS IS DEFINED

This is where the definition of being a Scottish taxpayer gets complicated. Apart from being a UK resident under the Statutory Residence Test for that particular tax year, you need to satisfy one of three conditions: 

  • you have a close connection with Scotland 
  • you don’t have a close connection with any part of the UK, but you spend more time in Scotland than in any other part of the UK
  • you’re a Scottish Parliamentarian for part or all of the tax year.  

So, what does ‘a close connection’ mean? If you only have one place of residence during the tax year and you live in if for part of the year, your close connection is in that place; if it’s in Scotland, you’re a Scottish tax payer and if it’s not, then you aren’t.  

If you only have one place of residence but that changes during the tax year, your close connection will be wherever you live longest in that tax year. If you have more two or more places of residence, again it’s wherever you live longest during the tax year. That might not be in any of your places of residence; it’s the part of the UK you’re living in that counts. 

MAKING IT CLEAR FOR YOU

As you can see, where you live during the tax year, and for how long, is a determining factor. However, there are special rules if you service in the UK Armed Forces, which are designed to make sure you don’t pay any more tax than others earning the same income but in a different part of the UK. 

While the rules are ostensibly the same for students, it’s likely you’ll spend part of your time in rented accommodation or Halls of Residence where you’re studying and the rest of the time in your parents’ house. But even if you spend most of your time where you’re studying, it might not be place with your closest connection, according to HMRC rules. 

We’ll discuss your situation with you and together we can work out if your closest connection is with Scotland or you spend more time in Scotland than anywhere else, so we can ascertain if you definitely are a Scottish taxpayer. This includes if you’ve relocated to Scotland during the tax year. 

WHAT ARE THE TAX RATES FOR SCOTTISH TAXPAYERS?

As mentioned above, there are five tax bands with increasing tax rates. The personal allowance is the same and generally, the tax rate is 1% higher in Scotland than the rest of the UK.   

Your National Insurance contribution rates are currently in line with the rest of the UK, and if you are self-employed you will need to pay your NI contribution through your self-assessment. 

If you make contributions to your pension, you’ll receive tax relief on them up to the amount you earn each year. If you have a personal pension, your pension provider applies tax relief at the Basic rate, so if you’re an Intermediate, Higher or Top rate tax payer, you’ll need to claim the extra tax relief from HMRC.   

  • We have an excellent relationship with AAB formed over 7+ years. Their accounts and tax compliance services are thorough and efficient, and the specialist tax planning advice we have received has been first class.

    Stanley & Evelyn Morrice

  • I have been a personal tax client of AAB for a number of years and in that time they have guided me through the tax return process and provided me with specialist advice relating to my non-resident tax position.

    Peter Williams

  • AAB recently helped my husband and I with appeals to both HMRC and the Norwegian tax authorities. They constantly kept us up to date with progress and were persistent in chasing up both authorities for refunds for us.

    Melanie McEvoy

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