Shake-up in Scottish Income Tax rules, but Business as Usual for Taxpayers


7th April 2016

Scottish taxpayers will see a new tax code appearing on their payslips from this week as the Scottish Parliament sets income tax levels for the first time.

But while the new Scottish Rate of Income Tax (SRIT) marks a major change politically, it shouldn\'t be too taxing for the people paying it. Taxpayers north of the border can rest assured that their rates and methods of payment will remain the same, according to Tayside based solicitors and estate agents Miller Hendry.

The new SRIT, introduced on April 6th 2016, is provided for in the Scotland Act 2012. Up until now, all income tax has been set by, and paid to, the UK Government. After a great deal of speculation on the new rate of income tax, Cabinet Secretary for Finance John Swinney announced in his recent Budget plan that Scots will pay 10% SRIT.

However, Scottish taxpayers will continue to pay income tax at the total rate of 20%, as before. The difference is that the tax paid will now be divided between the Scottish and UK Governments. In practice, this means that for basic rate taxpayers paying 20% income tax, the Scottish Government will receive 10% and the UK Government will receive the remaining 10%.

Alan Matthew, partner and employment law expert at Miller Hendry, explained:

\"The Scottish Rate of Income Tax applies to UK taxpayers with a main residence in Scotland. Employees and those in receipt of a pension will see a change in code on their payslip but apart from that, everything stays the same. If you pay income tax by PAYE, it will be collected as it is now, by HM Revenue and Customs.

\"Other than how the tax will be administered, no fundamental changes will occur. However, as the Government have longer term plans for income tax, significant changes may impact employees and employers in the near future.\"

How the new Scottish Rate of Income Tax will work

Q:When do I pay the Scottish rate?

A: If you live in Scotland, you will pay the Scottish Rate of Income Tax. If you have more than one home, you will pay the Scottish Rate only if your main home is in Scotland. Your main home is usually where you live and spend most of your time. However, your main home can be that where most of your possessions are, where your family lives, and where you are registered for bank accounts etc. This will still be the case if you spend the least amount of time here. This may apply to those who work away, such as lorry drivers and offshore workers. If you are unsure of which is your main home, you should seek advice from an accountant.

Q:How do I pay the Scottish Rate?

A: For employees and those in receipt of a pension, your tax code will change to start with an ‘S\', most commonly appearing as ‘S1100L\' for basic rate payers. If you are self-employed, your tax return will contain a box to confirm that you are a Scottish tax payer.

Q:What are the practical implications?

A: HMRC will continue to collect and manage income tax. Therefore, there should be no alarming practical difficulties for employees or employers. For cross border employees who will be touched by both tax systems, as the rate payable is dictated by the location of your main residence, no major difficulties are anticipated.

UK rates for Eng, Walesand NI

Income Bands

UK rate paid in Scotland

Scottish rate

Total Rate for Scottish Tax Payers

Basic rate 20%

£11,001 - £43,000



20 %

Higher rate 40%

£43,001 - £150,000




Additional rate 45%

Over £150,000




For further advice or information on employment law or other legal issues, visit

Miller Hendry

Miller Hendry is one of the longest established and largest legal firms in Tayside. With 16 partners and 150 staff, through our offices in Dundee, Perth, Crieff, Comrie and Auchterarder we provide a wide range of legal expertise to our clients. As well as a sizeable Estate Agency and Property Services business we have specialists in Court, Private Client, Asset Management and Commercial work.

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