Correctly identifying Scottish taxpayer status matters. With Scottish Income Tax rates and bands steadily diverging from those in the rest of the UK, employers and employees alike need to be aware of what constitutes Scottish taxpayer status.
And check that HMRC has the right address on file. The rise in remote working since the pandemic means it’s wise not to make assumptions.
Scottish taxpayer status is important because, in round terms, Scottish taxpayers earning more than around £28,867 currently pay more tax than those in the rest of the UK; whereas those earning less than this, pay less. The main risk, therefore, is that if someone is misclassified by HMRC, there’s the potential to accumulate a hidden tax liability.
The issue is clear cut for employees with just one ‘place of residence’, which is in Scotland. They are Scottish taxpayers, and a tax code with the ‘S’ prefix, should be used. The code S1257L denotes a Scottish taxpayer with the full Personal Allowance.
But there are more complex areas.
These include employees with more than one place of residence: and those moving into, or out of Scotland in the course of the tax year. Though it’s the individual’s responsibility to notify HMRC of a change of address, those with employees moving to Scotland might want to do some basic signposting: and most importantly, a Scottish tax code is needed if in the course of the tax year, the ‘main residence’ (Could you prove it?) is in Scotland for longer than elsewhere in the UK.
Do please contact us to discuss this more fully.
