Scots pay 46k less tax in England
A new analysis by Rathbones reveals that top earners in Scotland could save over £46,000 in income tax over five years by moving to England and commuting to their jobs, instead of remaining Scottish taxpayers.
The cross-border commuter trend is emerging through conversations with Rathbones clients and prospective clients who work in Scotland but are increasingly questioning where they should live as the gap between Scottish and rest-of-UK income tax rates continues to widen.
Income Tax Differences
Rathbones’ analysis shows that someone earning £250,000 could pay around £8,900 less income tax in the first year alone if subject to the income tax rates that apply in England rather than Scotland.
Assuming salary growth of 2% a year, the cumulative difference could exceed £46,000 over five years.
The findings reflect Scotland’s devolved income tax system, which currently operates six income tax rates above the Personal Allowance, ranging from 19% to 48%, while England, Northern Ireland and Wales have three main rates of 20%, 40% and 45%.
Tax Implications
Gordon Lawrie, Head of Rathbones’ Edinburgh office, says: “For higher earners, the tax map of the UK is becoming harder to ignore.
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A worker can live on one side of the border, work on the other and, depending on their tax residence, face a materially different income-tax bill.
“High earners ask us a very simple question, namely can I save tax if I live in England and continue to work in Scotland?
Someone earning £250,000, the difference could exceed £46,000 over five years, which is enough to make tax part of the conversation alongside housing, commuting and wider lifestyle considerations.”
For someone earning £150,000, the potential difference is around £5,900 in the first year and more than £30,500 over five years.
Competitiveness Concerns
The analysis also highlights the significant impact of the Personal Allowance taper, with taxpayers facing a marginal income tax rate of 60% in England and 67.5% in Scotland.
Rathbones argues that policymakers should place greater emphasis on Scotland’s long-term competitiveness through a simpler and more competitive tax system, in turn strengthening the country’s appeal as a place to live, work and do business.
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Adam Drummond, Head of Rathbones’ Glasgow office, says: “There is also a broader economic question for Scotland.
If tax policy starts driving higher earners elsewhere policymakers should consider what that means for Scotland’s long-term competitiveness, its ability to retain and attract investment and entrepreneurs to drive growth.
It’s a concern that could have far-reaching implications for the Scottish economy, particularly if the trend of cross-border commuting continues to grow.
The tax residence rules can be complex, and individuals should seek professional advice to understand how they may be affected, especially regarding their tax residence.
Rathbones’ analysis suggests that the potential five-year income tax difference ranges from approximately £12,300 for someone earning £80,000 to more than £46,000 for someone earning £250,000.
