The Scottish Rate of Income Tax (SRIT) explained (UK Income Tax National Rates for rest of UK)
The first thing to undertand is normal/national UK rates of income tax:
The new Scottish rate of income tax started on 6 April 2016.
There is a reduction of 10% in the normal rates of national/UK income tax for residents of Scotland. So, 'national' income tax is reduced but in addition the Scottish Parliament sets an additional Scottish rate of income tax (SRIT) that is paid to Scotland's government via HMRC.
Example: If UK income tax rates were: Basic rate income tax 20%, Higher rate income tax 40% and Additional rate income tax 45%. In Scotland these are reduced by 10% to Basic rate income tax 10%, Higher rate income tax 30% and Additional rate income tax 35%.
If Scotland then sets SRIT at 12%, the total rates of income tax for residents of Scotland would be:
What are the current Scottish Rates of Income Tax?
Scottish Income Tax Rates For Tax Year 2018 (06/04/2018 to 05/04/2019)
The amount you can earn/pension income before tax is deducted i.e. no tax to pay. The current personal allowances are:
Note: Personal allowances may be lower if have income in excess of you have underpaid tax in the past or if you have adjustments for taxable benefits in kind such as private medical insurance and a company car. Personal allowances may even be higher if you claim for things like uniform cleaning allowance.
Scottish Tax Rates and Tax Bands
Income above the above mentioned 'tax free' personal allowances is charged at the following rates:
Working Out The Tax - How it works - work out taxable income first
Basic Rate 20.00 % tax on taxable income below £31580.
Higher Rate 41.00 % tax on taxable income in excess of £31580
Additional Rate 46.00 % tax on taxable income above £150000.
How will I be paid?
Your payroll will run as normal and your employer will pay income taxes to HMRC.
Your tax returns will be completed as normal and administered by HMRC.
How will they know I am a Scottish Taxpayer?
"S" on National Insurance Number
Your national insurance number currently reads two letters then 6 numbers then a letter e.g. "XX 12 34 56 X"
The last letter in your national insurance number will be changed to the letter "S" to designate that you are Scotland resident.
What about tax relief on Pensions?
Currently, tax relief on pension contributions works the same way, but we are awaiting potential changes to tax relief overall (these were postponed by former Chancellor George Osborne following the Brexit vote).