How to pay income tax in Scotland

How the system works

As a general rule, if you live in Scotland you need to pay Scottish Income Tax. This income tax is deducted at the source and applies to your wages, your pension, and other taxable income such as stock market or company shares.

Good to know:

You also need to pay income tax if you a) moved to Scotland and now live there more than half the tax year b) have two residences, one in Scotland and another one elsewhere in the UK and you travel back and forth for work c) you don't have a home, but stay regularly in Scotland in hotels. Find out more here.

Each taxpayer has a tax-free Personal Allowance; an amount of income they don't need to pay taxes for. Currently, the standard Personal Allowance is £11,850 and your tax rate is calculated based on how much of your income surpasses the £11,850. However, if your income is above £100,000 your Personal Allowance is smaller. So for instance:

• if you're making £11,850 a year, you don't pay taxes at all
• if your income is between £11,850 and £13,850, you're in the starter rate and pay 19%
• if your income is between £13,851 and £24,000, you're in the basic rate and pay 20%
• if your income is between £24,001 and £43,430, you're in the intermediate rate and pay 21%
• if your income is between £43,431 to £150,000, you're in the higher rate and pay 41%
• if your income is over £150,000, you're in the top rate and pay 46%

Good to know:

If you're married, you can also 'transfer' £1,190 from your Personal Allowance to your spouse or civil partner's Personal Allowance. This will help them reduce their taxes by up to £238 per tax year. Find out more about the Marriage Allowance here.

Once you're settled in Scotland, you have to register at the nearest HM Revenue and Customs office to your place of residence. If you are employed, your tax code will start with an 'S', which will inform your employer that you are paying Scottish tax and they need to deduct it from your salary at the appropriate rate.

At the end of each tax year, you may need to file an online Self-Assessment Tax Return if you fall under the pertinent categories that need to do so. For example, you need to file a Self-Assessment Tax Return if:

• you are self-employed with an income of more than £1,000
• you're renting out a property and getting more than £2,500
• you have profits from share, income from investments or trusts
• you have income from abroad

If you fall under these categories, you will also need to keep records of your financial activities.

See the full list cases in which you'll need to file a Self-Assessment Tax Return here.

Good to know:

Nowadays there is an official HMRC app for your phone, that will help you check your taxes easily and quickly. Learn more here.