Scottish income tax rate – will it affect you?

The new Scottish income tax rate will come into effect on 6 April 2016. If you are an employee or have employees who are resident in Scotland for the majority of the tax year then they may be given Scottish taxpayer status; regardless of where their job is based in the UK.

What will happen before 6 April 2016?

HMRC will identify Scottish taxpayers and inform them and their employer(s) of the new tax code to apply to their PAYE prior to the introduction of the new Scottish income tax rate next year. You will be deemed a Scottish taxpayer if HMRC records show that:

  • you are resident in the UK for tax purposes
  • your main residence has a Scottish postcode, and you live at that address for most of the tax year.

HMRC will issue Scottish taxpayers with a new tax code with the prefix ‘S’.

What do employers have to do?

There won’t be much change for employers in complying with this new rule other than keeping employee contact details up-to-date and applying the new tax code. And as long as employers update their payroll software in time for the new tax year, it should take care of the necessary calculations.

Additionally, there will be no change to how employers report information or make payments to HMRC.

What happens if an employee changes address?

Scottish taxpayer status applies to the whole of the tax year. If HMRC becomes aware of a move to a non-Scottish residence, they will issue or withdraw the S-code in time for the new tax year. Any refund of tax overpaid or recovery of extra tax due will be dealt with through the PAYE system after the end of the current tax year.

What about pension schemes?

HMRC will keep pension providers, and registered pension scheme administrators informed to allow them to identify Scottish taxpayer members, and make the necessary amendments.

To discuss the Scottish income tax rate or to find out more about KPP’s services contact Stephen Usher on 0141 345 2355 or email

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