Income tax applies to the amount of income after deduction of personal allowances.

Income is taxed in a specific order with savings and dividend income taxed last.

Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.

The starting rate band is only applicable to savings income. The 0% rate is not available if the taxable amount of non-savings income exceeds the starting rate band.

For 2017/18 the Scottish Parliament set the rates of income tax and the limits at which these rates apply for Scottish residents.

2017/18:

TYPE BAND OF TAXABLE INCOME (£) RATE (%) DIVIDEND RATE (%)
Starting rate for savings¹ 0 – 5,000 0 N/a
Basic rate 0 – 33,500 20 7.5
Higher rate 33,501 – 150,000 40 32.5
Additional rate Over 150,000 45 38.1

For Scottish residents the following bands apply for non-savings and non-dividend income:

TYPE BAND OF TAXABLE INCOME (£) RATE (%)
Basic rate 0 – 31,500 20
Higher rate 31,501 – 150,000 40
Additional rate Over 150,000 45

There are special rates for savings and dividend income.

Savings Allowance:

BAND OF TAXPAYER AMOUNT (£) RATE (%)
Basic rate 1,000 0
Higher rate 500 0
Additional rate 0 N/a

Dividend Allowance:

BAND OF TAXPAYER AMOUNT (£) RATE (%)
All 5,000 0

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