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The Scotland Act 2012 gave the Scottish Parliament the power to impose a Scottish rate of income tax on Scottish taxpayers.

Scottish income tax applies to wages, pensions and most other taxable income.  A Scottish taxpayer for these purposes is someone who is resident in the UK, has a “close connection” to Scotland or who spends at least as many days in Scotland as elsewhere in the UK.

To date, there has been no change to the rate of income tax, however, for 2017/18 the higher rate tax threshold for Scottish taxpayers did not increase in line with the rest of the UK.

HMRC regulations state that any person considered to be a non-UK resident must be regarded as a UK taxpayer rather than a Scottish one.  This can be a problem where the individual has a Scottish address, as HMRC’s system may incorrectly determine that they are liable to the Scottish rates of income tax and thresholds. Non-UK resident taxpayers, classed as Scottish, who have non-savings or non-dividend income taxable in the UK, for example UK rental income, may, as a result, end up overpaying income tax.

The only method to correct this at present is to provide HMRC with an overseas address, however, this may not always be practical.

If you believe that you could be impacted by these issues for non-resident Scottish taxpayers, please get in contact.

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