Who is eligible to pay Scottish income tax?

As of April 2016, Scottish taxpayers will pay the Scottish rate of income tax (SRIT), which will be charged on non-savings and non-dividend income. Those eligible to pay Scottish income tax are those considered to have a “close connection” to Scotland.

Whether or not someone has a “close connection” is typically determined by their place of residence in the past tax year. A place of residence is defined within the confines of the law as a “dwelling in which that person habitually lives; in other words his or her home”. Her Majesty’s Revenue and Customs (HMRC) considers a place of residence to be “a place that a reasonable onlooker, with knowledge of the material facts, would regard as the dwelling in which that person habitually lives”.

Determining who is a Scottish taxpayer

There are a number of tests to determine Scottish taxpayer status. If, in the course of a tax year, an individual is a UK resident for tax purposes, they will be a Scottish taxpayer for that year if they are:

• A Scottish parliamentarian
• They have a “close connection” to Scotland

Income tax (IT) typically applies to an individual’s main place of residence – the property in which they have spent most time during the past tax year. If an individual has more than one place of residence and their main place of residence is in another part of the UK, they will not be eligible for SRIT and will pay IT in accordance with the laws of that part of the UK instead.

Those who have no clear “close connection” to Scotland or any other part of the UK because it is not possible to identify any place of residence or main place of residence – will be obliged to pay SRIT if the individual has spent as many days in Scotland as in other parts of the UK.

Misconceptions about Scottish taxpayers

More often than not, a Scottish taxpayer is someone who lives in Scotland. However, there are several misconceptions about what having a “close connection” to Scotland means in terms of SRIT.

Provided that their place of residence is outside Scotland, none of the following factors will force an individual to pay SRIT:

• Considering themselves to be Scottish in terms of national identity.
• Working in Scotland.
• Receiving other income from Scotland, such as a pension or salary from a Scottish organisation or entity.
• Travelling in or through Scotland on a regular basis for the purposes of work or leisure.

If you are unsure about the specific laws that surround places of residence or have any further questions about SRIT and whether you are eligible to pay it, please refer to the Scottish taxplayer technical guidance.