Do I have to pay the Scottish rate of income tax?

Updated on 27 April 2016

The Scottish rate of income tax (SRIT) applies from 6 April 2016 – to “Scottish taxpayers”. We explain who is a Scottish taxpayer, so that you can work out if the SRIT applies to you.

Only individuals can be Scottish taxpayers. Trusts, deceased estates, a body of trustees and personal representatives cannot be Scottish taxpayers – they cannot be chargeable to the SRIT. But if you are a Scottish taxpayer and you receive income from a trust or a deceased estate, you may be chargeable to the SRIT on this income.

You should make sure that HMRC have the correct and up-to-date address for you – this will help to ensure the question of Scottish taxpayer status is dealt with correctly and also means that you receive important information from HMRC. Also let HMRC know your new address if you move house.

In the guidance below we refer to “parts of the UK”. In the context of Scottish taxpayer status, the four “parts of the UK” are Scotland, Wales, Northern Ireland and England.

How do I know if I am a Scottish taxpayer or not?

The SRIT took effect on 6 April 2016.

The definition and tests for determining who is a Scottish taxpayer are contained in law. There is also HMRC guidance available.

The definition of a Scottish taxpayer is based around where an individual lives in the course of a tax year. Scottish taxpayer status applies for a whole tax year (a tax year runs from 6 April to 5 April) – you cannot be a Scottish taxpayer for only part of a tax year.

For most individuals, the question of whether or not they are a Scottish taxpayer is straightforward – either, they live in Scotland and are a Scottish taxpayer; or they live elsewhere in the UK and are not a Scottish taxpayer.

You must follow the Scottish taxpayer test to work out whether or not you are a Scottish taxpayer. If you pay tax under Pay As You Earn (PAYE), HMRC will make the initial decision, which you can appeal. If you pay tax under self assessment, you must decide whether or not you are a Scottish taxpayer, and indicate this in your tax return (tax year 2016/17 onwards). There is more information on this below.

If you have a PAYE code, and you are a Scottish taxpayer, from 2016/17 onwards, your code should have the prefix “S” – it is an “S” code, for example, a typical tax code would be S1100L. You can find your PAYE code on a PAYE coding notice, your form P60 and your payslips.

If your PAYE code for 2016/17 is not an “S” code and you think it should be, contact HMRC.

If your PAYE code for 2016/17 is an “S” code and you think it should not be, contact HMRC.

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Who is a Scottish taxpayer?

The SRIT took effect on 6 April 2016.

To determine whether or not you are a Scottish taxpayer, you must follow these steps:

  1. You must be a UK resident for tax purposes, under the Statutory Residence Test;
  2. You must meet one of three conditions:
    a. Either you have a “close connection” with Scotland; or
    b. You do not have a “close connection” with England, Wales or Northern Ireland and you spend more days in Scotland than in any other part of the UK, in that tax year; or
    c. You are a Scottish Parliamentarian for the whole or any part of the tax year.

If you are both a Welsh Parliamentarian and a Scottish Parliamentarian for the whole or part of the tax year, you might be a Scottish taxpayer.

Close connection

There are two tests for whether or not you have a “close connection” with Scotland, which depend on how many places of residence you have in the UK.

One place of residence in the UK

If you only have one place of residence in the UK in a tax year, and you live there for at least part of the year, you have a close connection with that part of the UK. So, if this is the case and your only place of residence (in the UK) is in Scotland, you are a Scottish taxpayer.

Two or more places of residence in the UK

If you have two or more places of residence in the UK during a tax year, you have to consider where your main place of residence is. To be a Scottish taxpayer, you must have a close connection with Scotland. This means your main place of residence must be in Scotland for more than it is in any other part of the UK. You must consider each part of the UK separately: Scotland, Wales, Northern Ireland and England.

What is a “place of residence”?

The term “place of residence” is not defined in the legislation. HMRC interpret the term as equivalent to “home” or dwelling in which you habitually live. Ultimately, whether or not somewhere is a place of residence depends on the facts.

In order for somewhere to be a place of residence, you must actually live there, even if only occasionally or for a short period of time.

You do not have to own the place – you can rent it, or your employer can provide it to you.

A place of residence does not have to be a house, flat or other building; it can be a boat, caravan, or mobile home for example. A hotel can also be a place of residence.

What is my “main place of residence”?

If you have more than one place of residence in the UK, you have to consider which of them is your “main place of residence”. Again, the law does not define this term.

Your main place of residence is not necessarily the residence where you spend the most nights, although it often is. HMRC consider it to be the place of residence with which you have the greatest degree of connection.

Again, the facts of each case will ultimately be decisive.

Day counting

When you count days for the purposes of Scottish taxpayer status, the basic rule is that you spend a day in a particular part of the UK if you are in that part of the UK at midnight (the end of the day).

If you do not have a “close connection” with Scotland (or any other part of the UK), you must count days. In order to be a Scottish taxpayer using day counting, you must spend more days in a tax year in Scotland than you spend in either Wales, Northern Ireland or England. You must compare each part of the UK separately.

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What if I move house during the tax year?

The SRIT took effect on 6 April 2016.

It is important that you tell HMRC your new address whenever you move house. This means you will receive important notices from HMRC and HMRC can assess your Scottish taxpayer status.

The same tests apply in terms of deciding whether or not you are a Scottish taxpayer.

If you move house during the tax year, this means you are likely to have more than one place of residence in the UK in the tax year. If both places of residence are in the same part of the UK, say Scotland, then you add together the time spent in those places of residence, when considering the “close connection” or day counting tests.

If you move house to a different part of the UK, this may affect your Scottish taxpayer status. Note that you are a Scottish taxpayer for a whole tax year – this does not mean that HMRC cannot re-assess your status during the tax year as circumstances change.

Your Scottish taxpayer status for a particular tax year can only be known with absolute certainty once the tax year has ended. But the PAYE system requires HMRC to determine Scottish taxpayer status in advance, based on the information in their possession. So if you are a PAYE taxpayer, your code:

  • may become an “S” code mid-year, if you move to Scotland; or
  • cease to be an “S” code, if you leave Scotland.

HMRC will change your tax code to try to ensure the correct tax is collected by the end of the tax year. The change in your tax code does not mean that you are only a Scottish taxpayer for part of the tax year.

If you are a self assessment taxpayer, you will submit a tax return following the end of the tax year, and can assess your Scottish taxpayer status with the benefit of hindsight.

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Who decides if I am a Scottish taxpayer?

The SRIT took effect on 6 April 2016.

Pay As You Earn (PAYE) taxpayers

If you pay tax under the PAYE system (you are an employee or you receive pension income taxed under PAYE), in the first instance, HMRC decide whether or not you are a Scottish taxpayer.

In December 2015, HMRC sent out notification letters to individuals within the PAYE system who they think might be Scottish taxpayers and also to those who they are certain are Scottish taxpayers.

Prior to the start of each tax year, HMRC issue PAYE codes. If HMRC think you are a Scottish taxpayer, they will give you a PAYE code known as an “S” code – this means it starts with the letter “S”, for example, a typical tax code will be S1100L. This tells your employer or pension payer to apply the SRIT. HMRC do not issue a PAYE coding notice to you simply to tell you about the “S” code – you only receive a coding notice showing your “S” code if you have a separate change in your tax position that triggers the issue of a coding notice, for example, you have a new source of untaxed income to include in your tax code. You are still able to check what your tax code is by looking at your payslip.

If you have received a notification letter or receive an “S” code, but you do not agree with HMRC, you can appeal against their decision. There is information on how to appeal in our section “when things go wrong”.

If you did not receive a notification letter or are not given an “S” code, and you do not pay tax under self assessment, you should contact HMRC. Make sure they have your up-to-date address.

New Starters

If you start a new job during the tax year, your employer may have to operate an emergency tax code, until HMRC process your new starter information and provide your employer with an up-to-date tax code for you. Even if you are a Scottish taxpayer, if your employer operates an emergency tax code, this will be a UK tax code, without an “S” prefix.

Self assessment taxpayers

If you do not pay tax under the PAYE system and submit an annual self assessment tax return, you must decide whether or not you are a Scottish taxpayer (self-assess your status). The tax return for 2016/17 will include a box, which you must tick if you think you are a Scottish taxpayer.

The normal rules for self assessment apply, in that HMRC can enquire into your tax return (normally up to 12 months after the date of submission). They may therefore ask questions if they disagree with your decision.

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What records should I keep?

The SRIT took effect on 6 April 2016.

With respect to your Scottish taxpayer status, you may need to keep records that can establish whether or not somewhere is your place of residence or main place of residence. You may also need to keep records of days spent in Scotland and elsewhere.

You should keep records relating to Scottish taxpayer status for at least 22 months after the end of the tax year, so for 2016/17, you should keep records until at least 31 January 2019.

If you complete a self assessment tax return and are self-employed, you should keep all records relating to your tax return (including Scottish taxpayer status) for at least five years after the submission deadline of the relevant tax year (so almost six years after the end of the tax year). For 2016/17, you should keep records until at least 31 January 2023.

Evidence that points to somewhere being your place of residence could include utility bills and council tax bills.

For individuals who think they might not be able to establish easily where their main place of residence is, we suggest keeping a diary of midnights, so that there is evidence available for day counting.

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Where can I find more information?

HMRC are publishing / have published guidance on Scottish taxpayer status for various groups on GOV.UK:

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