From 6 April 2016, taxpayers pay the Scottish rate of income tax if they live in Scotland.
This means that some of their income tax will be paid to the Scottish government. Employees’ and pensioners’ tax code will have the letter ‘S’. This should be at the beginning of the code, but for some it is at the end.
There is a box on the self-assessment tax return for the 2016 to 2017 tax year to inform HMRC if you fall within Scottish rate of income tax.
The good news is that the Scottish rate of income tax is 10% and taxpayers pay the same overall rate of income tax as people in the rest of the UK, whether they pay the basic, higher or additional rates. Taxpayers are liable to the Scottish rate from April 2016 if:
they move to or away from Scotland
they live in a home in Scotland and one elsewhere in the UK (eg for work)
they don’t have a home and stay in Scotland regularly (eg stay offshore or in hotels).
There have been a number of issues with taxpayers not receiving notices. Notices under the annual coding continue to be sent out, but problems have been encountered. This includes an issue whereby businesses expecting to receive a new Scottish tax code for employees have not been seeing this information when they download notices via their third-party software. HMRC has said that it will re-issue P9s and this error will be corrected by midday on Thursday 17 March 2016. Employers will receive an email alert notifying them that a new P9 is available.
HMRC has said that taxpayers must update their address with HMRC if their main home is in Scotland and they don’t get a letter from HMRC informing them that they are a Scottish taxpayer.