How do you know if you are a Scottish tax payer?

As the Scottish rates are due to change again from April 2024, and as the gap between the Scottish rates and those for the rest of the UK widen, we get two common questions.

While many think the way to determine Scottish residency is just the day count, it is usually not quite that simple. There are three main tests to consider

A Scottish Parliamentarian is always a Scottish tax payer regardless of their other circumstances.

This is the test that catches people out and is the most difficult to change. If the close connection test is met, it applies even if they are in other countries or parts of the UK more than they are in Scotland. It means the Scottish rates of tax will apply to your non-saving income (employment, pensions, property) even if this income is paid from England or elsewhere in the UK.

If a person has one place of residence and this is in Scotland, they will be a Scottish tax payer.

If you have more than one residence, there are a number of factors that determine which is the main place of residence. These include, where do the family spend most of their time, where are the kids at school, where are most of the hobbies and clubs located such as golf clubs, where are the majority of possessions kept, where is the individual registered with a doctor, dentist etc., where is the car registered, what is the main residence for council tax and where is the individual registered to vote.

As you will note from this list, it is all about where an individual is based rather than the time spent. Where individuals have a family or a clear connection to a home in Scotland, they will be a Scottish tax payer.

Where no close connection is clear, HMRC will then consider where the individual has spent the most time. This could be an individual with a property in Scotland and in England and with no partner or kids, and the other factors above split between both properties. It is likely the close connection test will be hard to determine, in which case the data count will be the deciding factor. More days in Scotland than the rest of the UK and they will be a Scottish tax payer, more days elsewhere in the UK and they will be taxed at the rest of the UK rates.

Where an individual is not resident in the UK for a tax payer or only for part of the year, they will be taxable on all UK arising income at the rest of the UK rates, even if the income arises in Scotland.

The application of these tests can cause confusion and with significant amounts of tax potentially at stake, take professional advice to make sure you are clear on your position.

More personal tax content