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Are you a Scottish Taxpayer?

23 July 2015

The media is full of stories about what new tax raising powers will be devolved to Scotland and it’s been well publicised that, from 6 April 2016, Scotland will be able to set its own rate of income tax for Scottish taxpayers.  So what does this mean exactly?

Well, the position will be that the main UK rates of income tax may be reduced by 10p in the £1 for Scottish taxpayers and in its place the Scottish Parliament will be able to levy a Scottish Rate of Income Tax (SRIT), applied equally to all Scottish taxpayers.  In simple terms, if the SRIT is reduced to zero we'll be much better off (eg a current 20% basic rate Scottish taxpayer would be paying only 10% basic rate)... but if it is increased beyond 10p in the £1, then the reverse will be true!

Correctly identifying your tax residence status is therefore going to be vitally important for the vast majority of people.

The real question now is therefore – who exactly is a Scottish taxpayer?

Draft guidance has been published on this very topic, giving us some idea of how Scottish taxpayer status will be determined. 

In summary, UK resident individuals will be Scottish Taxpayers during a particular tax year if their home (main place of residence) was in Scotland for a larger amount of time in the tax year than it was in England, Wales or Northern Ireland.  The key is therefore to determine where you live, not where you work.

In determining the main place of residence, HMRC will consider a number of factors:

  • If the taxpayer and their immediate family live in a property in Scotland
  • Where their children go to school
  • Where the majority of the taxpayer's possessions are kept
  • If they are registered to vote in Scotland
  • If they are registered with a Scottish doctor or dental surgery
  • If they have registered their Scottish property as being their main residence for council tax purposes.
  • Where correspondence (such as bank statements, utility bills and HMRC letters) are sent.
  • At which address the taxpayer’s car is registered and insured

In order to be a place of residence you must actually live in the property.  It isn’t enough to just buy a property in Scotland.

Where there is no clarity as to a person's main residence, Scottish taxpayer status will then be based on the number of days spent in Scotland compared with days in the rest of the UK.

Scottish taxpayer status applies for the whole of the tax year and it is not therefore possible to be a Scottish taxpayer for only part of the year.

From October 2015, HMRC will begin issuing Scottish taxpayers (with employment or pension income) PAYE tax codes prefixed with an ‘S’.  The employer will then be required to apply the SRIT to deduct the correct level of tax through the PAYE system.  Once you receive this, you should check to make sure your status has been correctly determined.

For the majority of people, Scottish taxpayer status will be fairly clear.  However, if your circumstances are not so straightforward, you may wish to consider what records you need to maintain to evidence your residence status.

If you require any further assistance or advice regarding any of the above, please contact or your usual Springfords adviser.

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