Young Scots who normally live and work in London or other UK cities, but who relocated back home during the pandemic could face bigger tax bills. While the attractions of moving to a place where accommodation and the cost of living generally is cheaper, you do have to be aware of the implications for your tax...
The problem is that that income tax rates in Scotland are considerably higher than in the rest of the UK for medium or high earners.
For example, someone earning £50,000 per annum who is Scottish tax resident will actually pay approximately £1,500 more in income tax, than someone who lives elsewhere in he UK.
You also need to be aware that if you live in Scotland for 183 days in the tax year (i.e. between 6 April 2020 - 5April 2021), you will be Scottish tax resident for the whole year and liable to Scottish taxes on all of your income for the year.
Moreover, if you actually have two 'homes' available during the year - one in Scotland and one in the rest of the UK - it is actually possible that they could be Scottish tax resident even if you spend less than 183 days in Scotland during the tax year. This might apply if your family ties, social links, personal property in Scotland are held to be more substantive than same links and ties you have in the rest of the UK.
if you have any concerns about your Scottish status, you can discuss the position directly with HMRC or your accountants/advisers (i.e. contact us!) to check if you are liable to Scottish taxes. This will allow you to ensure that any additional taxes due can be collected via the PAYE system.
The one thing you mustn't do is ignore the situation or you could find you owe significant additional taxes which need to be paid at short notice.
On the plus side, any Scottish-based individuals who relocate to the rest of the UK during Covid may be able to benefit from the lower income tax rates in the rest of the UK and lower earners who relocate to Scotland may benefit from slightly lower tax rates than those based in other home nations.
If you are in any doubt, please get in touch and we'll be pleased to help.
Julie Downie, Accounts Manager