There are many benefits to moving to Scotland for work or retirement, especially the stunning scenery. However, anyone contemplating a move should consider the tax cost of relocating from elsewhere in the UK.

The Scottish Parliament has set income tax rates and bands since April 2017, with the result that most Scottish taxpayers have generally faced a higher tax burden than other UK taxpayers. This cost is set to get even wider from April 2024.

Tax rates

The main difference between Scottish tax rates and those applicable to the rest of the UK is going to be Scotland’s new advanced rate of 45% which, from April 2024, will apply on income between £75,000 and £125,140. This is 5% higher than is payable on equivalent income in other parts of the UK.

Given that the personal allowance is tapered away where income is between £100,000 and £125,140, this will mean a marginal rate of 67.5% on this band of income: it is 60% in other parts of the UK. Once income hits £125,140, the Scottish top rate is 48% compared to the rest of the UK's 45% additional rate.

Comparison

The Scottish tax system generally hits harder at the higher end of the pay scale. Someone moving to Scotland after April with an income of £40,000 will see their annual tax bill go up by just over £110. However, it is nearly £3,350 more with an income of £100,000, and almost £6,000 where income is £150,000.

At the lower end of the scale, a pensioner moving to Scotland with an income of, say, £25,000, will actually see a modest reduction in their tax liability.

Scottish taxpayers

Having one home in Scotland and living there will make you a Scottish taxpayer, but also if:

  • You have two or more homes – whether owned, rented or lived in for free – and the main home is in Scotland; or
  • You spend more time in Scotland compared to the rest of the UK.

A person's main home is usually where the majority of time is spent, although this is not always the case.

The government has published a guide to income tax in Scotland on its website.

If you would like to know more or need help, please get in touch with one of our experts.