As a sole trader moving to Scotland, how do Scottish tax bands change my payments on account?

Full answer

Your tax residence on the first day of the tax year (6 April 2026) determines whether you pay Scottish or rest-of-UK income tax for the whole year, based on where your main home is. As a sole trader, your self-employment profits are non-savings income, so they fall under the Scottish bands once you are resident there. Scotland has more bands: starter 19%, basic 20%, intermediate 21% (income up to roughly £43,662 above the £12,570 Personal Allowance), higher 42% from £43,663 to £62,430, advanced 45% from £62,430 to £125,140, and top 48% above that. Rest-of-UK rates are 20%, 40% and 45%. National Insurance (Class 2 and Class 4) is UK-wide and unaffected, as is the Personal Allowance of £12,570. Payments on account are advance instalments toward next year's tax: HMRC takes two payments, each 50% of your previous year's income tax plus Class 4 NI liability, due 31 January and 31 July, with any balance settled the following 31 January. Because most profits between about £43,663 and £125,140 are taxed at 42% or 45% in Scotland rather than 40% in England, your total liability typically rises, which directly increases both payments on account. For example, on £55,000 profit, the slice between roughly £43,662 and £55,000 is taxed at 42% in Scotland versus 40% elsewhere, adding around £230 to your income tax. Your January and July payments on account each rise by about half that. If you expect lower profits next year, you can apply to reduce your payments on account, but underestimating triggers interest. Note that Scottish LBTT, not SDLT, applies if you buy your new home.

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