Higher earners in Scotland could save more than £46,000 in Income Tax over five years by moving to England while continuing to work north of the Border, according to new analysis from wealth management firm Rathbones.
The firm's calculations show that someone earning £250,000 could pay around £8,900 less Income Tax in the first year alone if they were subject to the rates applying in England rather than Scotland. Assuming a two per cent annual salary increase, the cumulative difference could exceed £46,000 over five years.
Growing tax gap drives client conversations
Rathbones said the difference in tax bills is increasingly becoming part of conversations with clients and prospective clients who work in Scotland but are questioning whether they should continue living north of the border. The firm, which has offices in Glasgow and Edinburgh, warned that Scotland's higher and more complex Income Tax regime risks encouraging some higher earners to consider living in England and commuting to jobs in Scotland.
Gordon Lawrie, Head of Rathbones' Edinburgh office, said: “For higher earners, the tax map of the UK is becoming harder to ignore. 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.”
Savings apply at lower salary levels too
The potential savings are not confined to people earning £250,000. Rathbones calculates that someone earning £150,000 could face a difference of around £5,900 during the first year and more than £30,500 over five years. For someone earning £80,000, the five-year difference could be around £12,300.
Scotland has six Income Tax bands above the Personal Allowance for the 2026/27 tax year: Starter Rate (19%) from £12,571 to £16,537, Basic Rate (20%) from £16,538 to £29,526, Intermediate Rate (21%) from £29,527 to £43,662, Higher Rate (42%) from £43,663 to £75,000, Advanced Rate (45%) from £75,001 to £125,140, and Top Rate (48%) above £125,140. By comparison, the main rates applying in England, Wales and Northern Ireland are 20 per cent, 40 per cent and 45 per cent.
Personal Allowance withdrawal adds to effective rates
The analysis also highlights the effect of the Personal Allowance being withdrawn once someone's income exceeds £100,000. The standard Personal Allowance is reduced by £1 for every £2 of income above £100,000 and disappears completely at £125,140.
Rathbones said this creates an effective marginal Income Tax rate of 60 per cent for affected taxpayers in England. For Scottish taxpayers paying the 45 per cent Advanced Rate, it calculates the equivalent effective marginal rate can reach 67.5 per cent while the allowance is being withdrawn.
Residency rules determine tax status
Where someone works does not by itself determine whether they pay Scottish Income Tax. HM Revenue and Customs (HMRC) says people generally pay Scottish Income Tax if they live in Scotland.
For someone with homes in both Scotland and elsewhere in the UK, their main home is important in determining their tax status. This will usually be where they live and spend most of their time, although HMRC can consider other factors. These can include where someone's family lives, where most of their possessions are kept and the address used for things such as their bank account, GP or car insurance. If a main home cannot be established, the number of days spent in different parts of the UK can be used to determine someone's Scottish taxpayer status.
Adam Drummond, Head of Rathbones' Glasgow office, said: “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.”
