Scottish taxpayers

Who can be a Scottish taxpayer

Only individuals can be Scottish taxpayers. Trusts, deceased estates, a body of trustees and personal representatives cannot be Scottish taxpayers – therefore they cannot be chargeable to Scottish income tax. But if you are a Scottish taxpayer and you receive income from a trust or a deceased estate, you may be chargeable to Scottish income tax on this income.

You should make sure that HMRC have the correct and up-to-date address for you – this will help to ensure the question of Scottish taxpayer status is dealt with correctly.

How to know if you are a Scottish taxpayer

The definition and tests for determining who is a Scottish taxpayer are contained in law. There is also HMRC guidance available – see below under the heading More information.

The definition of a Scottish taxpayer is based around where an individual lives during a tax year. Scottish taxpayer status applies for a whole tax year (a tax year runs from 6 April to 5 April), although if you are entitled to split year treatment under the Statutory residence test, the non-UK income relating to the overseas part of the year will not be within the scope of UK or Scottish income tax. You cannot be a Scottish taxpayer for only part of a tax year and a non-Scottish UK taxpayer for the other part.

For most individuals, the question of whether or not they are a Scottish taxpayer is straightforward – either:

• they live in Scotland and are a Scottish taxpayer; or
• they live elsewhere in the UK and are not a Scottish taxpayer.

You must follow the Scottish taxpayer test to work out whether you are a Scottish taxpayer. If you pay tax under Pay As You Earn (PAYE), HMRC will make the initial decision, which you can appeal. If you pay tax under self assessment, you must decide whether you are a Scottish taxpayer and indicate this on your tax return. There is more information on this below under the heading Decisions about Scottish taxpayer status.

PAYE codes for Scottish taxpayers

If you have a PAYE code, and you are a Scottish taxpayer, your code should have the prefix ‘S’ – it is an ‘S’ code, for example, a typical tax code would be S1257L. You can find your PAYE code on a PAYE coding notice, your form P60 and your payslips, or online via your Personal Tax Account.

Contact HMRC if:

• your PAYE code for 2024/25 is not an ‘S’ code and you think it should be; or
• your PAYE code for 2024/25 is an ‘S’ code and you think it should not be.

Scottish taxpayer status

To determine whether you are a Scottish taxpayer for a particular tax year, you must follow these steps.

First, you must be a UK resident for tax purposes for that tax year, under the Statutory residence test (including where split year treatment applies).

Second, you must satisfy any one of three conditions:

• you have a ‘close connection’ with Scotland; or
• you do not have a ‘close connection’ with any part of the UK, but in that tax year you spend more days in Scotland than in any other part of the UK; or
• you are a Scottish Parliamentarian for the whole or any part of the tax year.

The location of your work duties, your employer or your pension provider is not directly relevant for determining Scottish taxpayer status. Nor is it relevant whether you regard yourself as being Scottish, or if you were born in Scotland. Scottish taxpayer status is not a matter of choice.

The conditions under the second part of the test are assessed over the whole tax year, even if you are eligible for split year treatment under the statutory residence test.

Close connection

There are two separate tests for determining whether you have a ‘close connection’ with a part of the UK. Which test applies depends on how many places of residence you have in the UK during the year.

One place of residence in the UK

If you only have one place of residence in the UK in a tax year (which may be in any part of the UK and may be for all or part of the year), and you live there for at least part of the year, you have a close connection with that part of the UK. So, if this is the case and your only place of residence (in the UK) is in Scotland, you are a Scottish taxpayer.

Two or more places of residence in the UK

If you have two or more places of residence in the UK during a tax year, whether or not at the same time, you have to consider which of these is your ‘main place of residence’ at every point throughout the tax year.

If you only have a single place of residence at any one time but you move house (however many times) in the tax year, it will be clear where your ‘main place of residence’ is at every point. However, if you have two or more residences at the same time, you must consider which of these is your ‘main place of residence’.

You are deemed to have a close connection with Scotland, if your main place of residence is located in Scotland for at least as long as it is in any other single part of the UK.

You must consider each part of the UK for which you have a residence separately: Scotland, Wales, Northern Ireland and England.

It is important not to get confused: a ‘close connection’ is only defined as regards a part of the UK, not a residence. Similarly, your ‘main place of residence’ refers to a home or dwelling, not a part of the UK.

It is therefore possible to have a ‘close connection’ to Scotland through this part of the test even if your ‘main place of residence’ is in Scotland for less than half of the tax year.

Similarly, it is possible to spend more days in a single place of residence in Scotland than any other single place of residence yet not be a Scottish taxpayer.

Place of residence

The term ‘place of residence' is not defined in the legislation. HMRC interpret the term as equivalent to ‘home’ or dwelling in which you habitually live. Ultimately, whether somewhere is a place of residence depends on the facts.

For somewhere to be a place of residence, you must actually live there, even if only occasionally or for a short period of time.

You do not have to own the place – you can rent it, or your employer can provide it to you.

A place of residence does not have to be a house, flat or other building; it can be a boat, caravan, or mobile home for example. A hotel can also be a place of residence.

Main place of residence

If you have more than one place of residence in the UK, you have to consider which of them is your ‘main place of residence’. Again, the law does not define this term.

Your main place of residence is not necessarily the residence where you spend the most nights, although it often is. HMRC consider it to be the place of residence with which you have the strongest connection.

Again, the facts of each case will ultimately be decisive.

Day counting

When you count days for the purposes of Scottish taxpayer status, the basic rule is that you spend a day in a particular part of the UK if you are in that part of the UK at midnight (the end of the day).

If you do not have a ‘close connection’ with any part of the UK, you must count the number of days you spend in each part of the UK. To be a Scottish taxpayer using day counting, you must spend more days in a tax year in Scotland than you spend in either Wales, Northern Ireland or England. You must compare days spent in Scotland to days spent in each part of the UK separately. It is therefore possible to have a ‘close connection’ with Scotland under this part of the test even if you spend less than half the year in Scotland.

Members of the armed forces

There are some special rules for individuals who are employed in the armed forces to consider when working out if they are a Scottish taxpayer. These rules apply in addition to the general rules.

The special rules determine how the definition of a ‘place of residence’ applies to service personnel, and in particular to service-provided accommodation, accommodation on board Royal Navy vessels and temporary accommodation occupied during operational deployments.

The special rules have been published by the Ministry of Defence following a Freedom of Information request, and are available on GOV.UK. These rules relate to the Scottish rate of income tax (which applied in 2016/17, before Scottish income tax was introduced). However, the rules to determine who is a Scottish taxpayer for Scottish income tax for 2017/18 onwards are broadly the same. The Annex includes a number of examples to show how the rules apply in practice.

You should consider both the general rules covered on the rest of this page and the special rules in the Ministry of Defence guidance.

Students

The rules to determine Scottish taxpayer status are the same for students as they are for other individuals.

As a student, however, you may not find it straightforward to apply the rules to your circumstances or you may feel that the result is unexpected. HMRC give two examples involving students in their technical guidance (see Solomon and Rebecca).

As a student, you may spend time living both in rented accommodation during term time and at your parents’ house during the holidays. In this case, you will have two places of residence during the year. If at least one of these places of residence is in Scotland, you might be a Scottish taxpayer. There are two main scenarios that could arise.

Firstly, you may be able to determine which one is your ‘main place of residence’, that is the place with which you have the closest connection. This will not necessarily be where you spend the most days. For example, you might spend more time in your term-time accommodation, but have more connections with your parents’ home, because for example, that is where you:

• are registered to vote;
• keep most of your possessions;
• receive bank and HMRC correspondence;
• are registered with a dentist.

If your main place of residence is in Scotland, you are a Scottish taxpayer.

Alternatively, it might not be clear with which of the two places of residence you have the closest connection – you do not have a main place of residence. In that case, you will have to take into account where you spend the most time during the tax year. Day-counting will determine whether you are a Scottish taxpayer.

Moving house

It is important that you tell HMRC your new address whenever you move house. This means you will receive important notices from HMRC and HMRC can assess your Scottish taxpayer status.

The same tests apply in terms of deciding whether you are a Scottish taxpayer.

If you move house during the tax year, this means you are likely to have more than one place of residence in the UK in that tax year. If both places of residence are in the same part of the UK, say Scotland, then you add together the time spent in those places of residence, when considering the ‘close connection’ or day-counting tests.

If you move house to a different part of the UK, this may affect your Scottish taxpayer status. Note that you are a Scottish taxpayer for a whole tax year – however, HMRC can re-assess your status during the tax year as circumstances change.

Your Scottish taxpayer status for a particular tax year can only be known with absolute certainty once the tax year has ended. But the PAYE system requires HMRC to determine Scottish taxpayer status in advance, based on the information in their possession. So, if you are a PAYE taxpayer, your tax code:

• may become an ‘S’ code mid-year, if you move to Scotland; or
• cease to be an ‘S’ code, if you leave Scotland.

HMRC will change your tax code to try to ensure the correct tax is collected by the end of the tax year. The change in your tax code does not mean that you are only a Scottish taxpayer for part of the tax year.

If you are a self assessment taxpayer, you will submit a tax return following the end of the tax year, and can assess your Scottish taxpayer status with the benefit of hindsight.

Decisions about Scottish taxpayer status

How Scottish taxpayer status is decided – and amended if necessary – depends on whether you pay tax under PAYE or self assessment.

Pay As You Earn (PAYE) taxpayers

If you pay tax under the PAYE system (that is, you are an employee or you receive pension income taxed under PAYE), in the first instance, HMRC decide whether you are a Scottish taxpayer.

In December 2015, HMRC sent out notification letters to individuals within the PAYE system who they thought might be Scottish taxpayers and also to those who they were certain were Scottish taxpayers. They have not repeated this exercise.

Prior to the start of each tax year, HMRC issue PAYE codes. If HMRC think you are a Scottish taxpayer, they will give you a PAYE code known as an ‘S’ code – this means it starts with the letter ‘S’ – for example, a typical tax code will be S1257L. This tells your employer or pension payer to apply Scottish income tax rates and bands. HMRC do not issue a PAYE coding notice to you simply to tell you about the ‘S’ code – you only receive a coding notice showing your ‘S’ code if you have a separate change in your tax position that triggers the issue of a coding notice – for example, you have a new source of untaxed income to include in your tax code. You are still able to check what your tax code is by looking at your payslip, or via your Personal Tax Account.

If you receive an ‘S’ code, but you do not agree with HMRC, you can appeal against their decision.

If you are not given an ‘S’ code, and you do not pay tax under self assessment, you should contact HMRC. You should make sure they have your up-to-date address.

New Starters

If you start a new job during the tax year, your employer may have to operate an emergency tax code, until HMRC process your new starter information and provide your employer with an up-to-date tax code for you. Even if you are a Scottish taxpayer, if your employer operates an emergency tax code, this will be a rest-of-UK tax code, without an ‘S’ prefix.

Self assessment taxpayers

If you do not pay tax under the PAYE system and submit an annual self assessment tax return, technically you must decide whether you are a Scottish taxpayer (that is, you need to self-assess your status). However, there is no box on the paper return to indicate that you are a Scottish taxpayer. It is important to ensure that your address information on the tax return is correct.

If you complete the return using HMRC’s online software, HMRC will indicate if they think you are a Scottish taxpayer, and the tax calculation will reflect whether or not HMRC view you as a Scottish taxpayer. You should have an opportunity while completing the return online to declare that you are (or are not) a Scottish taxpayer.

If you file your return on paper and you ask HMRC to calculate your tax, then HMRC will do so according to whether they believe you are a Scottish taxpayer or not based on their records. You may wish to clarify your Scottish taxpayer status in a note to your tax return, if you have reason to believe HMRC’s records are incorrect on this point. The normal rules for self assessment apply, in that HMRC can enquire into your tax return (normally up to 12 months after the date of submission). They may therefore ask questions to see if your taxpayer status is correct.

If you receive a self assessment tax calculation that you disagree with, because you believe your Scottish taxpayer status is incorrect, you can appeal.

Record-keeping

With respect to your Scottish taxpayer status, you may need to keep records that can establish whether somewhere is your place of residence or main place of residence. You may also need to keep records of days spent in Scotland and elsewhere.

You should keep records relating to Scottish taxpayer status for at least 22 months after the end of the tax year. For 2024/25, this means that you should keep records until at least 31 January 2027.

If you complete a self assessment tax return and are self-employed, you should keep all records relating to your tax return (including Scottish taxpayer status) for at least five years after the submission deadline of the relevant tax year (so almost six years after the end of the tax year). For 2024/25, you should keep records until at least 31 January 2031.

Evidence that points to somewhere being your place of residence could include utility bills and council tax bills.

For individuals who think they might not be able to establish easily where their main place of residence is, we suggest keeping a diary of where you are each midnight, so that there is evidence available for day counting.

More information

HMRC have published guidance on Scottish taxpayer status for various groups on GOV.UK:

• General guidance for taxpayers;
• Guidance for service personnel: published on GOV.UK following a Freedom of Information request;
• Technical guidance aimed at tax advisers and HMRC.