Scotland Act 2016 implementation: tenth annual report

3. Scottish Income Tax

Since 6 April 2017, the Scottish Parliament has had the power to set the Income Tax rates and bands applicable to Scottish taxpayers on their non-savings and non-dividend income, but powers over the personal allowance and savings and dividend income are reserved to the UK. The rates and bands are set each year by a parliamentary motion known as a Scottish Rate Resolution.

Costs

2025-26 Developments

Additional implementation costs

26. HMRC completed the majority of the implementation work to deliver Scottish Income Tax by 2019-20, however the announcement of the Scottish Advanced Rate at the 2024-25 budget on 19 December 2023 attracted additional implementation costs.

27. During 2025-26, HMRC invoiced the Scottish Government for £1.2 million of costs relating to the implementation and administration of Scottish income tax in 2024-25. Of this amount, £0.5 million related to running costs, which is £0.1m less than 2023-24. The remaining £0.7 million related to the implementation of the Advanced rate of Scottish income tax.

28. For the financial year 2025-26, the Scottish Government incurred costs of £0.5 million for the administration of Scottish Income Tax. HMRC also expects to re-charge the Scottish Government a smaller amount of £0.1 million to reflect the work relating to the Advanced rate coming to its conclusion.

Assurance from National Audit Office & Audit Scotland

29. The National Audit Office (NAO) published its report^[2] on the administration of Scottish Income Tax 2024-25 on 16 January 2026. The report stated that “HMRC has adequate rules and procedures in place to assess and collect Scottish income tax, and that these are being complied with”. Audit Scotland reviewed the approach taken by the NAO, as requested by the Scottish Parliament when Income Tax powers were devolved and endorsed the NAO findings in their assurance letter also published on 16 January 2025^[3].

Scottish Taxpayer Identification

30. HMRC has estimated that there were 2.9 million Scottish taxpayers in 2023-24, which is a 5.7% increase from 2022-23. Scottish Government and HMRC agree on the importance of the correct identification of Scottish taxpayers to enable the successful implementation of Scottish Income Tax powers. HMRC undertake regular address assurance activity on its customer data to ensure that its identification of the Scottish taxpayer population is as accurate as possible.

31. In 2025, HMRC undertook an additional exercise to match their Scottish taxpayer records to a third-party data source (known as a ‘data clash’). The aim of this exercise is to test whether HMRC's identification of Scottish taxpayers is corroborated by other data sources. HMRC's analysis of the results show that their identification of Scottish taxpayers is correct in 99 per cent of cases.

Outturn Data

32. HMRC published the 'Scottish Income Tax Outturn Statistics: 2023 to 2024^[4] in July 2025. This showed that Scottish Income Tax liabilities were £17.1 billion in 2023-24.

33. These figures were formally signed off after the NAO had completed their annual audit of HMRC Annual Report and Accounts, and Trust Statement in July 2025. This was the sixth publication of outturn data that have included receipts from the five band Scottish Income Tax System implemented in 2018-19.

Future plans

34. The Scottish Income Tax board continue to evaluate the divergence of Scottish Income Tax system with the rest of the UK. This work has recently focused on the possibility of producing a Scottish income tax gap. This would estimate the difference between the amount of tax that should be paid by Scottish taxpayers and what is actually paid, allowing a better quantification of compliance risks. We also continue to bring to conclusion the implementation of the Advanced rate and its incorporation into business-as-usual operations.