On the 25th January, many of us with a claim to Scottish ancestry use the birthday of Robert Burns as an excuse to join friends for some poetry and to eat haggis with neeps and tatties. I had a Scottish great-grandfather, making me Scottish up to the ankles, if not the shins. You may, like me, be a fraction Scottish but as far as your Income Tax is concerned, it’s either Scottish, or it isna.
The Scottish Rate of Income Tax was introduced in April 2016 and gives the Scottish Parliament powers to deviate from the taxes set in Westminster. It is collected by HMRC in the same way as the tax for the rest of the UK. HMRC chooses which tax applies based on where you live, not where you work, or your ancestry or how many verses of Auld Lang Syne you know.
In this tax year, you will pay the same amount of tax whether you live in Scotland or not. From next April, the higher rate tax thresholds are changing and some people will pay a bit more tax just because they live in Scotland.
Income Tax is an annual tax and it is quite possible to be a Scottish rate tax payer in one tax year and not the next. The way PAYE is taken from your wages makes it seem continuous, but there is an annual reconciliation to adjust the amount back to the correct calculation for the full tax year.
If someone moves between Scotland and another part of the UK, HMRC looks at where they lived for most of the tax year (which starts on 6 April). A higher rate tax payer who moves from Scotland to England next September (before the middle of the tax year) will not pay the Scottish Rate of Income Tax for the whole 2017/18 tax year. The £314* saving of higher rate tax could be put towards the cost of next year’s Burns supper.
* Edited 3/2/17. After this article was published, the Scottish Finance Minister announced a different higher rate tax threshold for 2017/18. This would yield a saving of £400 instead of £314.