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New Scottish Income Tax rates

Find out about the new rates and what they might mean for you.

What is happening?

In December 2017 the Scottish Government proposed a new Scottish Income Tax structure as part of the draft Scottish Budget. The Scottish Parliament approved this on 21 February 2018 and it will come into effect from 6 April 2018.

If your main residence is in Scotland and you have a Self-Invested Personal Pension with Alliance Trust Savings, the new Scottish Income Tax rates will be relevant for how we administer your SIPP Account. If your main residence is outside of Scotland, this will not affect you.

Important information

Please remember investments can go down as well as up. You may get back less than you originally invested.

Alliance Trust Savings does not give advice. You need to ensure you understand the risks and commitments before investing. If you are unsure you should consult a Financial Adviser before investing.

Laws and tax rules may change in the future without notice. The information here is our understanding in April 2018. This information takes no account of your personal circumstances which may have an impact on tax treatment.

What are the new rates?

Tax band In Scotland In the rest of the UK
Rate If you earn Rate If you earn
Starter rate 19% £11,851 to £13,850 n/a n/a
Basic rate 20% £13,851 to £24,000 20% £11,851 to £46,350
Intermediate rate 21% £24,001 to £43,430 n/a n/a
Higher rate 41% £43,431 to £150,000 40% £46,351 to £150,000
Top rate 46% £150,001 or more 45% £150,001 or more

The tax bands we’ve shown here assume you get the full tax-free personal allowance for Income Tax of £11,850. It is reduced by £1 for every £2 of income over £100,000.

Live in Scotland and have a SIPP with us?


Paying into your SIPP?

If you are paying into your SIPP, following guidance from HMRC we will continue to claim basic rate tax relief of 20% on your behalf on your personal contributions. This tax relief is paid in to your SIPP.

Where you pay Income Tax at the Scottish starter rate of 19%, you will not be asked to repay the difference. There is no action you need to take.

Where you pay Income Tax at the Scottish intermediate, higher or top rates you can claim extra tax relief through your self-assessment tax return, if you submit one, or by contacting HMRC if you don’t. Tax relief claimed this way is not paid in to your SIPP. You’ll either get it through an adjustment to your tax code or through a tax rebate from HMRC. This is how it is currently administered for those paying tax at the higher and top rates.

Taking money out of your SIPP?

If you are taking income from your SIPP we will continue to collect any Income Tax you are due from your income before we pay it out to you, based on your tax code.

From 6 April we will continue to do this at the new Scottish rates. Other than being aware that the new rates will apply, there is no action you need to take.


What do you mean by main residence?

Broadly speaking, it’s where you would say you live.

If you live in the UK and:

  • You only have one residence and it’s in Scotland, and you live there for at least part of the year
  • You have more than one residence, at least one of these is in Scotland and you live there for more of the year than you do anywhere else in the UK
  • You couldn’t clearly say where your main residence was, but you spend more days in Scotland than anywhere else in the UK

You’re likely to be a Scottish taxpayer. If you are not sure whether HMRC view you as a Scottish taxpayer, check your tax code (which you’ll be able to find on a payslip or by contacting HMRC). If you are a Scottish taxpayer it will start with an ‘S’.

My main residence is in Scotland and I’ve got a SIPP, do I need to take any action?

Only if you are:

  • going to pay tax at the Scottish intermediate, higher or top rates;
  • are paying in to your SIPP; and
  • want to reclaim any extra tax relief you are entitled to on your personal contributions.

Is it worth claiming any extra tax relief I am entitled to?

This is your decision. We can’t give you personal advice. Any tax relief you get depends on your personal circumstances. To give you a rough idea of the amounts involved:

  • If you pay tax at the Scottish intermediate rate of 21% you can potentially reclaim extra tax relief worth £1 for every £100 (before tax) that you personally pay in to your pension.
  • If you pay tax at the Scottish higher or top rates the potential tax relief is worth £21 and £26 respectively for every £100 (before tax) that you personally pay in.

In all cases, the amount of extra tax relief you can get will be no more than the total amount of tax you actually pay at your highest marginal rate.

MORE ON PENSION TAX RELIEF

How do I claim any extra tax relief?

You can reclaim it through your self-assessment tax return if you complete one (if you pay higher or top rate tax this is something you may already be doing). Otherwise, you should contact HMRC.

How is any extra tax relief paid?

You’ll either get it through an adjustment to your tax code or through a tax rebate from HMRC. This is how it is currently administered for those paying tax at the higher and top rates.

I’m worried my tax code is wrong and I’ll pay too much tax on my pension income. What do I do?

Please contact HMRC and ask them to review your tax code. Following guidance from HMRC we can only make tax deductions from your income based on the tax code they have supplied to us.

I have an ISA and/or Investment Dealing Account. Are they affected?

We do not claim tax relief on or deduct income tax from any payments made in or out of these types of accounts, so they are not affected.


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Need help?

If you have questions or would like to speak with us, get in touch today.

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Email: contact@alliancetrust.co.uk

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Call: 01382 573737
(lines open 8am to 5pm, Monday to Friday, and calls may be recorded for training and monitoring purposes).

Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC 98767, registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings gives no financial or investment advice.