Anyone living in Scotland may pay income tax at a different rate to those in the rest of the UK from April 2016.
The new rules will apply to expats with a home in Scotland who are temporarily living or working overseas.
Most income will fall under the measure, including salaries, pension payments and rental profits.
The personal allowance will still apply across the entire UK, and so will the rates of tax paid on dividends and interest on savings.
The new income tax rate for Scotland will be announced in 2016.
Who pays tax in Scotland?
Everyone with ties to Scotland will be affected – the ties are:
- Anyone living in Scotland regardless of their nationality
- Anyone with a home in Scotland and another home in the UK
- Anyone regularly staying in Scotland even if they do not have a home in the country
The new tax rules cover anyone renting a home, staying with someone else or owning a home in Scotland.
The official definition means your home is the place where you spend most of your time but can also be the place where your belongings are kept or where you are registered with a doctor or your contact address for official documents like bank correspondence and car insurance.
How do you know if you pay tax in Scotland?
Taxpayers will know they are paying the Scottish rate of income tax because their PAYE coding will start with an ‘S’ – so expect to see the personal allowance ‘S1100L’ on your payslips and tax papers if you receive the standard personal allowance from April 2016.
Anyone paying at the Scottish rate will also have to confirm this by ticking a box on their self-assessment return for the 2016-17 tax year onwards.
HM Revenue & Customs (HMRC) also requires anyone moving to or from Scotland during the tax year to let them know about their change of address so they can make sure that they are paying the correct rate of income tax.
Anyone running a business and changing the place where they operate from Scotland to elsewhere in the UK will also have to notify HMRC.
The reason for the change is that the UK government has granted tax raising powers to the Scottish Assembly.
