How Scottish Income Tax Works

A complete step-by-step guide to understanding Scotland's unique tax system and how your tax is calculated.

1. The Basic Concept

Scotland has devolved tax powers, meaning it sets its own income tax rates separate from the rest of the UK. This gives Scotland a unique tax system with more tax bands and, in most cases, higher tax rates than England, Wales, and Northern Ireland.

If you live in Scotland, you pay Scottish income tax on your worldwide income (unless you're exempt). The key difference from other parts of the UK is the number of tax bands and the rates applied at each band.

2. The Step-by-Step Process

Step 1: Calculate Your Total Income

Start by adding up all your income for the tax year (April 6 - April 5):

Employment salary
Self-employment profit
Investment income (interest, dividends)
Rental income
Pension income
Other sources of income

Step 2: Deduct Your Personal Allowance

Everyone gets a personal allowance - an amount of income you can earn without paying tax. For 2025/26, this is £12,570.

Example: If you earn £25,000, you subtract £12,570 = £12,430 taxable income

Step 3: Apply the Tax Bands

Tax is applied progressively through Scottish tax bands. You pay different rates on different slices of your income:

£12,570 - £14,732 (Starter):19%

£14,732 - £25,688 (Basic):20%

£25,688 - £43,662 (Intermediate):21%

£43,662 - £125,140 (Higher):41%

Above £125,140 (Top):46%

Step 4: Calculate Income Tax

For each bracket your income falls into, multiply the amount in that bracket by the tax rate:

Example (£30,000 income):

Personal allowance: £12,570 (tax-free)
Taxable income: £17,430
£2,162 at 19% (Starter) = £410.78
£10,956 at 20% (Basic) = £2,191.20
£4,284 at 21% (Intermediate) = £899.64
Total tax: £3,501.62

Step 5: Add National Insurance

While calculating separately, National Insurance is deducted alongside income tax:

8% on earnings between £12,570 and £50,270
2% on earnings above £50,270

Step 6: Calculate Your Net Pay

Subtract both income tax and national insurance from your gross salary to get your actual take-home pay.

3. Key Differences from Rest of UK

Aspect	Scotland	Rest of UK
Number of bands	6 bands	3 bands
Basic/Lower rate	19-20%	20%
Higher rate	41%	40%
Top rate	46%	45%

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