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Scottish Income tax
Changes

Important - A SIPP is a type of pension for people happy to make their own investment decisions. Investments go down in value as well as up so you could get back less than you invest. The rules mentioned are those currently applying and could change in the future. You can normally only access the money from age 55 (57 from 2028). Tax reliefs depend on your circumstances. This website is not personal advice, if you are unsure an investment is right for you, please seek advice.

Over the last few years, the Scottish government has been given increasingly wide-ranging powers over setting their own income tax rates and bands.

They’ve now made full use of these powers for the first time with a number of changes to income tax.

What’s changed?

There are now five tax bands for Scottish taxpayers.

Scotland’s finance secretary, Derek Mackay, said the change will mean those earning under £33,000 in Scotland will pay less tax.

Higher earners in Scotland will pay more tax than the rest of the UK, with the higher tax rate rising from 40% to 41%, and the top rate from 45% to 46%.

Earnings Tax rate in Scotland
Personal allowance Up to £11,850 Tax free
Starter rate £11,850 - £13,850 19%
Basic rate £13,850 - £24,000 20%
Intermediate rate £24,000 - £43,430 21%
Higher rate £43,430 - £150,000 41%
Additional rate £150,000+ 46%

The rest of the UK only has the personal allowance and three bands (basic rate, higher rate and additional rate).

Who is affected?

Only Scottish income taxpayers are affected.

Broadly, you are a Scottish taxpayer if you are resident in the UK and:

  • You have only one UK residence, which is in Scotland, and you live there for part of the year
  • You have more than one UK residence, at least one of which is in Scotland, and you live in Scotland for more of the year than you do in any other part of the UK
  • You cannot identify your main residence and spend more days in Scotland than in any other part of the UK

Scottish taxpayer status applies for the entire tax year. It’s not possible to be a Scottish taxpayer for only part of it.

Is pension tax relief affected?

The government tops up personal contributions with basic-rate tax relief (currently 20%), instantly boosting the amount of money saved (even if you pay tax at a rate below basic rate). This hasn’t changed.

Scottish taxpayers with income above £24,000 can claim back up to a further 26% when they make a personal contribution but this extra amount won’t be added automatically. They will need to complete a tax return or write to their local tax office.

This means, for example, that a £1,000 contribution would only cost £800 for a non, starter rate or basic-rate tax payer. For an intermediate-rate tax payer it could cost just £790 and for a higher-rate tax payer as little as £590. Those paying tax at the top rate could find it costs them as little as £540.

Please remember, you need to pay enough tax at the higher rate to claim back the full amount of tax relief.

Find out how much tax relief you could get

Remember, to receive tax relief, your personal contributions are limited by the amount you earn that tax year. If you are a non-earner or earn less than £3,600, you can still pay in £2,880 which the government will top up to £3,600. Money held in a pension cannot normally be accessed until age 55 (57 from 2028), up to 25% tax-free and the rest taxed as income.

Find out more about how much you can contribute to a pension

Find out more about tax relief