What the Scottish rates cover
The Scottish Parliament sets the rates and bands for what the law calls non-savings income: wages, pensions, rent and self-employed profit. Savings interest and dividends are outside its powers, so they’re taxed at UK rates in Scotland too. The personal allowance, £12,570, is the same across the UK, and so is the £500 dividend allowance.
Scottish bands for 2026/27
| Rate | Name | Taxable income up to |
|---|---|---|
| 19% | Starter | £3,967 |
| 20% | Basic | £16,956 |
| 21% | Intermediate | £31,092 |
| 42% | Higher | £62,430 |
| 45% | Advanced | £125,140 |
| 48% | Top | above that |
The bands are on taxable income, after the personal allowance. For 2025/26 the starter rate ran to £2,827 and the basic rate to £14,921; the rest were the same.
How dividends fit on top
Your income is still taxed in the usual order: salary first, then savings, then dividends. For a Scottish taxpayer, the taxable salary is taxed at Scottish rates, but it is also placed in the UK bands to decide where savings and dividends start (Income Tax Act 2007, section 13). The dividends then use the UK dividend rates for the UK band they fall in: 10.75% in the basic rate band up to £37,700 of taxable income, 35.75% above it, and 39.35% over £125,140.
That means a Scottish taxpayer can be paying 42% on part of their salary while their dividends are still taxed at the ordinary rate of 10.75%, because their total taxable income is below the UK’s £37,700 band limit.
A worked example
A Scottish taxpayer has a salary of £30,000 and £20,000 of dividends in 2026/27.
- Their taxable salary is £17,430. At Scottish rates the tax on it is £3,451.07.
- In the UK bands, that £17,430 leaves £20,270 of the £37,700 basic rate band, enough for all £20,000 of dividends.
- The first £500 of dividends uses the dividend allowance, and the other £19,500 is taxed at the ordinary rate of 10.75%.
The dividend tax is £2,096.25 and the total £5,547.32. Outside Scotland the same income would pay £5,582.25. In 2025/26, with the lower dividend rates and Scottish bands, it would have been £5,189.07.
Who is a Scottish taxpayer
Broadly, you pay Scottish income tax if you live in Scotland. If you have homes in more than one part of the UK, it depends on where your main home is, or where you spend most of the year. Your tax code starts with S. GOV.UK explains the rules.
It’s where you live that counts, not where your company is registered or where you work. A director living in Glasgow pays Scottish rates on their salary even if their company is based in London, and a director living in Carlisle pays the rest-of-UK rates even if they work in Scotland. If you move during the tax year, you’re a Scottish taxpayer for the whole year if Scotland was your main home for most of it.
Because dividends are taxed at UK rates wherever you live, the mix of salary and dividends that suits a director can differ in Scotland. A higher salary costs more at Scottish rates above £31,092 of taxable income, so the case for taking more as dividends can be stronger. Salary or dividends explains how to weigh it up.