Scottish Taxes
The Scottish Government has the power to vary the Income Tax rates for people who live in Scotland, but not in respect of income from savings or dividends, which are taxed at rates applicable to the rest of the UK (as are capital gains).
If you are resident in Scotland in 2022/23, you may pay Income Tax at up to five different rates: 19%, 20%, 21%, 41%, and 46%. The latter two rates are due to increase on 6 April 2023 to 42% and 47% respectively.
These Scottish tax bands are not aligned with the NICs thresholds, which leads to some very high marginal rates for Scottish residents, as shown in the table.
The NICs rates are different for self employed individuals and don’t apply for those over state pension age. The high marginal rate between £100,001 and £125,140 arises because the Personal Allowance is withdrawn by £1 for every £2 of additional income in that band. The threshold for the highest rate is also reducing to £125,140 on 6 April 2023.
| Employee in Scotland in 2023/24 | |||
|---|---|---|---|
| Income in band £ |
Scottish tax % |
NIC % |
Total rate on band % |
| 0 – 12,570 | 0 | 0 | 0 |
| 12,571 – 14,732 | 19 | 12 | 31 |
| 14,733 – 25,688 | 20 | 12 | 32 |
| 25,689 – 43,662 | 21 | 12 | 33 |
| 43,663 – 50,270 | 42 | 12 | 54 |
| 50,271 – 100,000 | 42 | 2 | 44 |
| 100,001 – 125,140 | 63 | 2 | 65 |
| Over 125,140 | 47 | 2 | 49 |
| Action Point! |
|---|
| If you live in Scotland and plan to take taxable income from your pensions or pay yourself a bonus, you may want to take that income before 6 April 2023 to reduce your tax bill. However, you must be careful not to push your income into a band where it is taxed at 54% or 65%. |