Scottish Income tax rates due to rise from 6 April 2018

The Scotland Act 2016 provides the Scottish Parliament with the power to set all income tax rates and bands that will apply to Scottish taxpayers’ non-savings, non-dividend (NSND) income for tax year 2018/19. 

From 6 April 2018 there will be significant discrepancies between the Scottish rates of income tax and the rates paid by taxpayers in the rest of England, Wales and Northern Ireland. Will this result in some taxpayers moving south or supplying their services via limited companies to avoid this increase?

From 2018/19 the Scottish higher income tax rate will be 41% on income between £43,430 and £150,000 where the top rate is 46%. Note that under the Scottish system there is a 19% starting band on the first £2,000 of taxable income and an intermediate rate of 21% for income between £24,000 and £43,430. The 20% rate applies to income between £13,850 and £24,000 (taxable income £2,001 to £12,150).

If you employ Scottish taxpayers they have a special S PAYE code so that payroll software collects the tax correctly.