Scottish and Welsh tax rates: differences employers need to know
Income tax in the UK is not uniform across all four nations. Scotland and Wales have devolved income tax powers, which means the rates and thresholds that apply to a Scottish or Welsh employee may differ from those that apply to an employee based in England or Northern Ireland. For employers with staff in Scotland or Wales, applying the correct rates is a payroll compliance obligation.
Scottish income tax rates are set by the Scottish Parliament and can differ significantly from the rest of the UK. For 2025/26, Scotland has more tax bands than England. Scottish taxpayers pay:
— Starter rate: 19% on earnings from £12,570 to £14,921
— Basic rate: 20% on earnings from £14,921 to £26,561
— Intermediate rate: 21% on earnings from £26,561 to £43,662
— Higher rate: 42% on earnings from £43,662 to £75,000
— Advanced rate: 45% on earnings from £75,000 to £125,140
— Top rate: 48% on earnings above £125,140
The contrast with the rest of the UK is significant, particularly for middle earners. Someone earning £30,000 in Scotland pays income tax at 21% on some of their income; the equivalent person in England pays 20%. The divergence widens at higher earnings.
Who is a Scottish taxpayer? The residence-based definition applies: someone who has their main residence in Scotland at the start of the tax year, or who has lived in Scotland for longer than any other part of the UK during the tax year, is a Scottish taxpayer — regardless of where they work. A Scottish taxpayer who commutes to work in England is still a Scottish taxpayer.
HMRC identifies Scottish taxpayers through the tax code. An employee subject to Scottish rates has a tax code beginning with S — for example, S1257L. When you receive a P45 or a P6/P9 code notification for an employee with an S prefix, apply Scottish rates. Your payroll software must use the Scottish tax tables, not the rest-of-UK tables.
Welsh income tax rates have historically mirrored England's. For 2025/26, the Welsh rates are the same as the rest-of-UK rates. Welsh taxpayers are identified by a C prefix on their tax code — for example, C1257L. Even though the rates are currently the same, the C prefix must still be applied correctly in case the Welsh Parliament changes the rates in future.
National Insurance rates are the same across the UK — NI is reserved to Westminster and does not vary by devolved nation. Pension auto-enrolment obligations are the same. SSP, SMP, and other statutory payments are the same.
For employers with staff in Scotland or Wales, ensure your payroll software correctly identifies and applies the S or C prefix codes. For employers who are not certain which of their employees are Scottish or Welsh taxpayers, HMRC's code notices are the authoritative source — do not ask employees to self-declare and do not assume based on location of work.
See our PAYE plain English guide and tax codes explained for the broader context of how Scottish and Welsh codes work within PAYE.
Mellow applies Scottish and Welsh rate tables automatically based on the tax code prefix. [Start a free trial →](https://mellowhr.com/register)