Scottish rate of income tax and pension tax relief

The Scotland Act 2012 gives the Scottish Parliament the power to set the Scottish rate of income tax. As a result, since 6 April 2016, Scottish taxpayers have been subject to lower rates of UK income tax. However, they are also subject to the additional Scottish rate of income tax (SRIT), money collected from which goes to the Scottish Government.

From the 2017/18 tax year, the overall income tax paid by some Scottish taxpayers will differ to that paid by equivalent counterparts in the rest of the UK.

For the 2017/18 tax year, the UK Government has increased the higher rate income tax threshold from £43,000 to £45,000. The Scottish Government, however, has maintained the threshold at £43,000.

Overall basic, higher and additional rates of income tax have been maintained at 20%, 40% and 45% respectively for all UK taxpayers.

This means Scottish taxpayers with income above £43,000 will now pay a higher amount of overall income tax than equivalent counterparts in the rest of the UK (on income above £43,000 and up to £45,000).

This briefing note provides further explanation in the context of pension contribution tax relief.