February 20, 2017

Scottish Tax Codes

To work out how much tax you have to pay, HMRC gives you a tax code. Different people have different tax codes due to differing circumstances. For example, the tax year April 2016/17, Scottish tax codes began with ‘S,’ to show if you are Scottish or not. Your employer will be concerned with ensuring you have the right tax code. If you need additional guidance a Glasgow accountant will be able to help.

Are you a Scottish Taxpayer?

You will pay the Scottish rate of income tax if you live in Scotland. This means that some of your income is paid to the Scottish Government. Everyone has a personal allowance of income that they do not have to pay tax on. Most people’s tax code will be S1100L if they pay the Scottish rate.

Are you a business owner?

Some accountants sit with laptops to discuss scottish tax codes

If you have people working for you, there are some things you must do before the 6th of April – the start of the new tax year. For each employee you must prepare a payroll record, identify the correct tax code to use in this tax year and also enter the correct tax code on the payroll record. HMRC issue the new tax codes. However, if you do not receive a new codes for the new tax year, you should contact HMRC on their helpline.

What You Should Do Before April the 6th 2017

For your employees without a new tax code, carry over the authorized tax code from 2016/2017 to this new tax year. Employees with a new tax code, keep and use the form P9 or any other tax code notification onto your payroll record. For employees that are leaving your business, you should not need to change the tax code for these employees. Even if you will be paying the employee until after the 6th of April, just carry over their tax code from the previous year. Also, if an employee starts and gives you a P45, just follow the instructions from HMRC.

How does the rate of income tax work?

A stack of bank notes from all over the uk

If you are a Scottish taxpayer, you will need to understand the Scottish rate of income tax. Scottish tax codes are managed by your employer. For the tax year 2016/17 the Scottish Government announced the rate of income tax at 10%. The Scottish rate of income tax applies to non-savings and non-dividend income of Scottish taxpayers. For example, the SRIT will affect the amount of income tax you pay on employment income, rental profits, taxable benefits etc. To find out more about tax check out our last post.

Who is responsible for collecting the tax?

HMRC is where your income tax will end up. Scottish taxpayers will be notified by HMRC if they appear as Scottish taxpayers. You can appeal against HMRC if you do not agree. If you are with PAYE (pay as you earn), which the Scottish rate of income tax is calculated under, HMRC will issue Scottish tax codes to tell your employer or pension payer. The correct amount of income tax is then guaranteed to be deducted. Also! If you are a Scottish taxpayer, do not worry! Any of your donations made under gift aid will continue to benefit from tax relief.

If you have any questions about the Scottish tax system, an accountant from The Kelvin Partnership will be more than happy to help. Feel free to get in touch!