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Is it better to be a Scottish saver?
Or should I say a resident of Scotland when it comes to paying tax. And of courses a frugal saver.
In particular if you are managing your income and trying to go as close as you dare to being a higher rate tax payer but keeping the max £1,000 tax free savings interest allowance rather than breaching the cliff edge and ending up with only a £500 allowance.
If my understanding is correct, the savings figure to hit the cliff edge (where £1,000 drops to £500) aligns with the income tax bands of England & Wales, no matter where you are resident and paying tax in the UK.
So if you are in Scotland you can overshoot into a higher band by "a tottie wee bit" or indeed "a wodge," but don't risk losing £500 of the allowance. You have a decent amount of headroom to play with.
Handy for frugal savers.
Shame you have to put up with the Scottish climate, and in some parts those pesky midgies, in order to have this advantage.
Comments
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Whether it’s better lo live in Scotland or another part of the UK will depend on various factors. I don’t think income tax is a point in Scotland’s favour though.
just because the personal savings allowance in Scotland drops from £1,000 to £500 at the same income level as the rest of the UK why is that an advantage? And yes, like you say the 40% income tax rate kicks in at a lower income. So frugal savers will still pay more tax in Scotland.1 -
But in Scotland we pay more than a "tottie wee bit" extra in income tax...between £29-43k earnings it's 1% extra, then between £43k and £50k it's 22% extra.
Earning £50k, you'd take home an extra £1500 per year in England vs up here. And you'd still be paying the same tax on interest as if you lived in England.
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But in Scotland we pay more than a "tottie wee bit" extra in income tax...between £29-43k earnings it's 1% extra
You are forgetting about the 19% band. The break even point for paying more tax in Scotland over England is £33504 for 26-27, a 10.5% increase over 25-26 which only had a 5% increase over 24-25. Anyone would think there was an election coming when they decided on that increase.
Never associate with idiots on their own level, because, being an intelligent man, you'll try to deal with them on their level - and on their level they'll beat you every time.
Being hated by idiots is the price you pay for not being one of them.
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A good point, but I didnt mention it as it's not really relevant if we're talking about earning in the £50k region. The 1% difference between £12-16k accounts for about £40 extra tax for an English taxpayer... and as you noted that's cancelled out by the time you earn around £33k
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In terms of savers…taken this to mean tax on savings interest…it makes no difference. This is a UK wide tax with common thresholds and limits set across England, Northern Ireland, Scotland and Wales.
“You’ll pay the same tax as the rest of the UK on dividends and savings interest.”
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I really didn't intend to stir up a debate about the overall income tax differences between the two countries.
...my musings were based on the strategy to avoid the, somewhat unfair, cliff edge of a tax free allowance changing from £1,000 to £500. Particularly if you are managing your income to deliberately stay a basic rate tax payer, staying just below the Scottish higher rate starting point.
The cliff edge hinges around whether you cross the threshold into the English higher rate tax band.
Scottish tax payers can be a bit more blasé about how close they get to the Scottish higher tax band, indeed they can stray above it and keep their £1,000 allowance intact. English tax payers, trying to manage their income to keep below higher rate taxes, would be penalised and go over the cliff edge by having even so much as a penny over the threshold, dropping down to the less generous £500 allowance.
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But Scottish residents face exactly the same cliff edge at exactly the same income level. The only difference is that it doesn't align with the tax bands in the same way, but that doesn't avoid any of the issues you've noted.
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In relation to the "cliff-edge", as I understand it…
- Someone earning £43,663 to £50,270, including £1,000 interest income, would pay more tax in Scotland, despite having the same PSA as someone in England. Above £1,000 PSA, savings would be taxed at the same 20%.
- Someone earning £50,271 or more would also pay more tax in Scotland and would have a reduced PSA just like someone in England. Above £500 PSA, savings would be taxed at the same 40%.
Below £43,663, as others have pointed out, there is the 19-21% business, but that is not applicable to savings, and from the next tax year Scottish savers will be paying 22% on savings interest above their PSA (and starting rate for savings if applicable), even if their earned income would be taxed at 19%.
I think I'm correct in saying that at all income levels, savings interest is taxed the same regardless of the nation in which you live.
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On your last point your right:
“You’ll pay the same tax as the rest of the UK on dividends and savings interest.”
If the OP does self assessment and access to the system they can do some dummy inputs perhaps to help see the effects…that’s what I did.
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The 19% band is only worth £28 a year. Its a complete gimmick & total waste of time
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