Scotland’s Income Tax changes

Scotland’s Income Tax changes

Published: 10 Apr 2018 Updated: 13 Jun 2022

Scotland has begun the new tax year by introducing two new Income Tax rates and bands. It’s worth noting that these changes only apply to non-savings income, so income from other sources, such as bank interest, will still be taxed at UK rates. Capital Gains Tax and Inheritance Tax are also unaffected as these are UK taxes and not determined by the Scottish Government.

Two new Income Tax bands

Two new Income Tax bands have been introduced. The first is called the ‘starter rate’. This applies to people with lower incomes of £11,850 - £13,850 who will now pay 19% Income Tax. Another band, the ‘intermediate rate’, has been added at 21% for people earning above the median salary (£24,001 - £43,430).

The basic rate will remain at 20%, which applies to those earning £13,851 - £24,000.

1% increases for higher earners

For people earning above £43,430, the higher Income Tax rate has increased from 40% to 41%. For additional-rate tax payers earning above £150,000, it has risen from 45% to 46%.

What does this mean for pension tax relief?

Those paying the starter rate (19%) and the basic rate (20%) will receive 20% tax relief on their pension contributions.

If your pension scheme deducts your contributions before you pay Income Tax, you will continue to receive tax relief at your marginal tax rate. However, if your scheme deducts contributions from your net pay after your income has been taxed, or if you pay net contributions personally, then only basic rate relief (20%) will be available at source. Further tax relief based on the 21%, 41% or 46% rates can be claimed via self-assessment or by contacting HMRC.

What does it mean for Gift Aid?

Any donations made using Gift Aid will still be topped up by 25%. If you pay the new increased rates, you can personally claim back the difference between the tax rate you pay and the basic rate on your donation.

You can do this either through your self-assessment or by speaking to HMRC about amending your tax code.

Do you need help with your tax allowances?

Our financial planners spend their days helping people make the most of their tax allowances and to structure their finances tax-efficiently. Why not book a no-obligation initial consultation to find out what we can do for you? Call us on 020 7189 9999, click the link below or email

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This article was previously published on Tilney prior to the launch of Evelyn Partners.