Corporate report

Scottish Income Tax HMRC Annual Report 2026

Published 22 September 2026

Applies to Scotland

Scottish Income Tax at a glance

Our work in numbers:

• 3,036,400 Scottish taxpayers identified as at 2024 to 2025
• £18.6 billion Non-Saving/Non-Dividend Income Tax generated by Scottish taxpayers
• 4 Scottish Income Tax (SIT) Board meetings held
• 4 Compliance Working Group meetings held
• 5,800 letters sent as part of the Scottish third-party data assurance exercise
• 1 piece of data analysis published
• 1,670 invalid or blank postcodes updated
• 1,065 new postcodes updated based on ONS data

See Annex D: Metrics Dictionary for the sources, scope, and caveats of these figures.

What changed in 2025 to 2026

The Starter rate band and Basic rate band were increased by 22.6% and 6.6% respectively. The Higher, Advanced, and Top rate thresholds were frozen until the end of the Parliament. Full details of the tax bands and rates in 2025 to 2026 are available on GOV.SCOT.

In the 2025 Budget, the UK Government announced a measure to introduce separate tax rates for property income from April 2027. The UK Government is providing the Scottish Government with the ability to set Property Income rates in line with their current Income Tax powers in the fiscal framework.

The Service Level Agreement was updated to set out that in the absence of a Scottish Rate Resolution, the Scotland Act 1998 enables the UK Government to lay a Treasury Order to allow the continued operation of PAYE for Scottish taxpayers at the rates and bands of the previous tax year.

The Scottish Government commissioned HMRC to explore calculating a Scotland specific Income Tax Gap. Following initial scoping and discussions, HMRC have produced a roadmap for delivery which the Scottish Income Tax Compliance Working Group approved.

HMRC published an updated analysis of long-term trends in intra-UK migration between Scotland, Wales, and the rest of the UK. See Intra-UK migration of taxpayers for the full analysis and results.

What is changing in 2026 to 2027

The Starter Rate band and Basic rate band are increasing by 40.3% and 13.6% respectively. The Higher, Advanced, and Top rate thresholds are being maintained at their current levels. Full details of the tax bands and rates in 2026-27 are available on GOV.SCOT.

The Service Level Agreement has been updated to incorporate the Memorandum of Understanding.

HMRC is aiming to deliver the Scottish Income Tax Gap in Summer 2027. The SIT Compliance Working Group will oversee the delivery.

HMRC is exploring making changes to compliance systems to more readily identify Scottish taxpayers.

HMRC and the Scottish Government will continue to prepare for the introduction of separate tax rates for property income.

Key messages

• most Scottish taxpayers experience SIT through HMRC’s standard services and notice little difference in how HMRC interacts with them. See Taxpayer Experience
• the 2024 to 2025 outturn figure (total amount of Non-Saving/Non-Dividend Income Tax generated by Scottish taxpayers) was £18.6 billion. See 2024 to 2025 Outturn Calculation
• HMRC will stop producing the provisional estimate. See Provisional Estimate
• the latest (2025) third-party data assurance exercise found that HMRC residency information is between 98 to 99% accurate. The next exercise will be held in 2027. See Key Controls to Assess and Collect Income Tax and Annex A Findings from Third Party Data Assurance Exercise
• HMRC assesses the risk of SIT non-compliance in 2025-26 and 2026-27 as low. See Assessing and Mitigating the Risk of SIT Non-Compliance
• HMRC recharged the Scottish Government £0.50 million. See Cost of Administering SIT

Governance

HMRC and the Scottish Government oversee the operation of SIT through formal governance structures. The SIT Board provides senior oversight of performance, delivery, costs, and key risks while the SIT Compliance Working Group provides more detailed scrutiny of compliance risks.

Taxpayer experience

Conclusion

In most cases, Scottish taxpayers experience SIT through HMRC’s standard PAYE and Self Assessment services and notice little difference in how HMRC interacts with them compared with taxpayers elsewhere in the UK.

HMRC’s objective is to provide the same level of customer service, support and transparency to Scottish taxpayers as is provided to other Income Tax taxpayers, while ensuring that guidance, systems and communications reflect the Scottish rates and thresholds that applied in 2025 to2026.

Evidence

In 2025, HMRC developed evidence-based Scottish Self Assessment customer journeys to understand the customer experience and identify pain-points. Evidence from the customer journeys and business intelligence reporting in 2025 to 2026 suggests that the main points of interaction for Scottish taxpayers continued to be tax codes, online account access, address updates, guidance, and Self Assessment residency questions.

In 2025 to 2026, there were 86 calls to the Scottish Income Tax telephone route within the HMRC Personal Taxes helpline. This gives customers generic pre-recorded SIT messages prior to speaking to a HMRC customer advisor. The average call wait time was 21:30 minutes.

HMRC also monitored complaints. HMRC tracks all Scottish Income Tax customer complaints to ensure they are processed within the HMRC customer service targets. HMRC received 12 complaints from Scottish Income Tax customers. The complaints covered topics including incorrect application of S codes, Marriage Allowance, and updating address details.

During 2025 to 2026, HMRC reviewed and updated SIT guidance products ahead of the start of the tax year so that information available to Scottish taxpayers on GOV.UK remained accurate and commensurate with that available to taxpayers in the rest of the UK. HMRC also updated calculators, systems, and tax tables used in administering Scottish rates and thresholds, including tools used by employers and compliance caseworkers, to support accurate operation of the 2025 to 2026 Scottish rates.

HMRC also engaged with external stakeholders, reviewing queries raised and correcting cases bought to our attention.

Limitations

The available evidence is drawn mainly from customer journey work, operational indicators and business intelligence rather than a standalone end-to-end measure of the Scottish taxpayer experience. As a result, HMRC can identify the main points of contact and common issues, but the evidence base is stronger in some parts of the customer journey than others.

The customer complaints data does not represent all the customer complaints HMRC receives from Scottish taxpayers. Tier 1 complaints arrive and are responded to by the business area. 

The customer call data does not represent all the telephone calls HMRC receives from Scottish taxpayers as they may use different phone lines. Devolved telephony data is unavailable for the majority of the tax year due to changed reporting information. The figures above are based on calls between April 2025 to July 2025.

Future work

HMRC will continue to use insight from the customer journeys, business intelligence reporting and engagement with the Scottish Government to identify further opportunities to improve the experience of Scottish taxpayers. This includes continuing to refine guidance, communications and service design where evidence suggests that Scottish taxpayers may benefit from clearer information or smoother processes.

Assurance

2024 to 2025 Outturn calculation

Conclusion

For 2024 to 2025, the amount of Income Tax attributable to the Scottish Government budget was £18.6 billion.

Evidence

HMRC calculates the outturn using available administrative data and publishes a full statistical release. The full report is available at Scottish Income Tax Outturn Statistics: 2024 to 2025.

The outturn figure was calculated using actual data available from HMRC’s Pay As You Earn and Self Assessment systems, about 3 months after the Self Assessment filing peak. Further detail is provided in the SIT Outturn Statistics 2024 to 2025, which includes the information shown in the HMRC accounts and additional breakdowns for Scottish taxpayers and taxpayers in the rest of the UK.

Limitations

A small component (under 5%) of the outturn figure is estimated, drawing on historic data such as filing patterns and compliance activity. This reflects trade-offs between timeliness and budgetary certainty. A degree of estimation will always be required because some tax liabilities continue to be established for several years after the end of the tax year.

Future work

The 2025 to 2026 outturn figure will be published in 2027.

Provisional Estimate

Conclusion

HMRC and the Scottish Government have agreed to stop producing the provisional estimate. The Scottish Public Audit Committee and the National Audit Office have been informed of this decision.

Evidence

In previous years, HMRC calculated a provisional estimate of SIT revenue expected after the end of a tax year. This was published in the Annual Report and Accounts and followed by the Office for Budget Responsibility’s SIT forecast, which is produced by HMRC using the same method and is therefore the more accurate forecast.

Limitations

The provisional estimate duplicated analytical effort because it used the same methodology as the subsequent Office for Budget Responsibility forecast, which provided a more accurate version of the same estimate.

Future work

The analytical resource usually assigned to the provisional estimate will be redirected to other high-priority work funded by the Scottish Government.

Key controls to assess and collect Income Tax

Conclusion

HMRC has a high degree of confidence in the accuracy of its Scottish taxpayer identification and postcode records. HMRC’s residency information is between 98 to 99% accurate, postcode records show a high level of accuracy, and ongoing assurance activity helps protect revenue for the Scottish Government.

Evidence

HMRC engages an external supplier to carry out a third-party data assurance exercise to assess the accuracy of its identification of Scottish taxpayers. The latest report is available in Annex A, Third-Party Data Assurance Exercise 2025 and shows that HMRC’s residency information is between 98 to 99% accurate.

HMRC also conducts address assurance scans to identify and correct postcode data quality issues, including invalid postcodes and blank postcodes containing indicators that an address is in Scotland. In 2025 to 2026, HMRC corrected 1,670 invalid or blank postcodes in Scotland.

HMRC receives quarterly postcode updates from the Office for National Statistics (ONS) and updates its processes for flagging Scottish residency to reflect changes including new build properties and the subdivision of existing properties. In 2025 to 2026, HMRC received and updated 1,065 new postcodes in Scotland based on information from the ONS.

Finally, HMRC have set a flag to review all residential moves into one of the Scottish Cross Border postcodes. HMRC review these moves to ensure the correct residency indicator is set. There were 38 Scottish cross border moves reviewed in 2025-26 and of those, 9 resulted in amending the customer’s residency status. 

Limitations

There is no definitive data set of Scottish residents against which to judge success, so assurance relies on corroborative exercises rather than direct verification.

HMRC receives address data from a variety of sources, including individuals, employers, and other government departments, which means that while most records are accurate, a small minority will always require correction.

Future work

As the third-party assurance results were below the agreed threshold for an annual exercise, the next third-party data assurance exercise will be held in 2027. HMRC and the Scottish Government have reviewed the threshold for holding an annual exercise and agreed to change the threshold to 0.25% for future exercises.

The next address assurance scan will be completed in 2026 to 2027, and HMRC will continue to receive and apply quarterly postcode updates from the ONS in 2026 to 2027.

Assessing and Mitigating the Risk of SIT Non-Compliance

Conclusion

HMRC assesses the risk of SIT non-compliance as low, with no evidence of widespread behavioural change because of SIT. Given the 2026 to 2027 changes to the Starter and Basic rate band limits, HMRC’s initial view is that the risk will remain low in 2026 to 2027.

HMRC’s assessment was reviewed through established governance arrangements, including the Compliance Working Group and the Scottish Income Tax Board.

Evidence

The primary drivers of SIT non-compliance are:

• differences between the Scottish and UK Income Tax rates and bands
• migration patterns to and from Scotland which can impact taxpayer identification
• employer operation of tax codes

HMRC’s assessment is informed by the differential between Scottish and UK Income Tax rates and the evidence gathered from previous activity. HMRC’s compliance approach is overseen by the Scottish Compliance Working Group and the Scottish Income Tax Board. In 2025 to 2026, the differential between tax paid at the UK and Scottish rates remained at a similar level to previous years in which no widespread non-compliance was observed.

Recent analytical work has examined a range of indicators relevant to compliance risk, including:

• migration patterns to and from Scotland
• mismatch analysis of individuals resident in Scotland but not recorded as Scottish taxpayers
• individuals with multiple properties who may have more complex residency positions
• employer coding errors

HMRC’s address assurance scans show no evidence that individuals living in Scotland are manipulating their addresses to claim to live elsewhere. If this were taking place on a significant scale, HMRC would likely see an increase in the number of Scottish taxpayers becoming UK taxpayers. Similarly, the third-party data assurance exercise gives HMRC confidence that the correct residency status has been applied in 98 to 99% of cases, with the remaining 1 to 2% not necessarily wrong, but uncorroborated.

HMRC’s longitudinal analysis of intra-UK migration found no negative trend in net migration to Scotland in the years following the introduction of the 5 band SIT system in 2018 to 2019.

Analysis by Risk and Intelligence Service (RIS) found that only 0.9% of Scottish residents are not registered as Scottish taxpayers — approximately 47,000 out of 5.2 million Scottish residents identified on HMRC systems. There may be legitimate reasons for those not registered as Scottish taxpayers, for example where a primary residence has changed but HMRC has not yet been notified, or where individuals are within Self-Assessment and awaiting submission of their tax return to register as Scottish taxpayers.

Data on title deeds is restricted due to data sharing conditions, therefore figures derived using this data are not suitable for publication. However, analysis indicates that the vast majority of individuals who own property in both Scotland and elsewhere in the UK are registered as Scottish taxpayers. This suggests that individuals with more complex residency positions pose minimal risk of manipulating their residency for tax purposes.

Analysis of Income Tax (IT) compliance interventions found that Scottish taxpayers are subject to similar levels of activity as non-Scottish taxpayers.

Limitations:

We cannot draw conclusions from the longitudinal migration analysis because we do not know what the level of migration would have been if Income Tax had not been devolved.

In addition, a small number of cases of SIT non-compliance may not be identified, and any activity designed to find such cases would be unlikely to be cost effective even if it recovered yield.

Scottish residency and Scottish taxpayer status are assessed at a point in time; the figures provided in RIS analysis are correct on 06 February 2026 and subject to change.

Future work

In 2026 to 2027, HMRC will continue to monitor the effect of the revised Starter and Basic rate band limits and keep its assessment of SIT non-compliance risk under review through its established governance arrangements. HMRC will also continue its analytical work on migration patterns, mismatches, complex residency cases, employer coding issues, and wider behavioural indicators.

Cost of Administering SIT

Conclusion

In 2025 to 2026, HMRC recharged the Scottish Government £0.50 million as the net additional cost wholly and necessarily incurred as a result of the implementation and administration of SIT. HMRC has a robust process in place to identify the costs of administering SIT accurately.

Evidence

We provide the Scottish Government with a report each month outlining the quarterly costs to be recharged. Once the SIT Board is satisfied that the costs are accurate, HMRC raises an invoice, supported by evidence that allows the Scottish Government to assure itself of the accuracy of the costs to be recharged. Further detail is set out in the Rechargeable Costs Framework annexed to the Service Level Agreement.

Quarter	Implementation and Operating Costs Recharged in 2025 to 2026 (£ million)
Quarter 1	£0.09
Quarter 2	£0.15
Quarter 3	£0.14
Quarter 4	£0.12
Full year	£0.50

Cost (£ million)	2021-22	2022-23	2023-24	2024-25	2025-2026
Implementation Costs	Not applicable	Not applicable	£0.43	Not applicable	Not applicable
Operating Costs	£0.60	£0.59	£0.56	£0.50	£0.50
Total Cost	£0.60	£0.59	£0.99	£0.50	£0.50

The implementation costs shown in 2023 to 2024 relate specifically to the Advanced Rate.

Limitations

Comparisons across years should be read with care. Figures shown for the total cost of SIT invoiced in a financial year may not exactly equal the sum of implementation and operating costs because of invoicing schedules.

Future work

HMRC will continue to provide monthly cost reports, maintain SIT Board oversight of rechargeable costs, and support the Scottish Government with evidence to assure future recharging.

SLA Mapping Index

This index maps the main responsibilities and performance requirements set out in the Service Level Agreement for operation of SIT by HMRC, as described on GOV.UK, to the sections of this report and annexes where supporting evidence is provided.

SLA Requirement	Expectations of HMRC	Evidence in this Report and Annexes
Taxpayer identification and residency controls	HMRC should operate processes and controls that support accurate identification of Scottish taxpayers and correct application of residency status.	Key Controls to Assess and Collect Income Tax; Annex A; Annex B.
Collection and management of SIT revenues	HMRC remains accountable for the collection and management of SIT revenues and must evidence the correct amounts brought to account.	Key Messages; 2024 to 2025 Outturn Calculation; Key Controls to Assess and Collect Income Tax.
Service quality for Scottish taxpayers	HMRC should provide a consistent quality of service to Scottish taxpayers, equivalent to that provided to taxpayers elsewhere in the UK	Scottish Income Tax at a Glance; What Changed in 2025 to 2026; Key Messages; Taxpayer Experience.
Data and analysis for forecasting, policy, and budgeting	The Scottish Government needs sufficient data and analysis from HMRC to support forecasting, policy development, rate setting and budgeting, and to manage forecast variance.	Scottish Income Tax at a Glance; What Changed in 2025 to 2026; 2024 to 2025 Outturn Calculation; Provisional Estimate; Annex C.
Compliance risk management	HMRC should assess and manage the risk of SIT non-compliance and keep the risk under review.	Key Messages; Assessing and Mitigating the Risk of SIT Non-Compliance; Annex B.
Annual reporting and transparency	HMRC should evidence that it is operating SIT efficiently and effectively and delivering the agreed services.	Scottish Income Tax at a Glance; Taxpayer Experience; Assurance; Annex.
Operation of PAYE, Self Assessment and supporting systems	HMRC should maintain systems, processes, tax codes, guidance and operational arrangements needed to administer SIT within the UK tax system.	What Changed in 2025-26; Taxpayer Experience; Key Controls to Assess and Collect Income Tax.
Governance, monitoring and joint working	HMRC and the Scottish Government should maintain governance, monitoring and reporting arrangements to oversee the operation of Scottish Income Tax.	Scottish Income Tax at a Glance; Governance section; Assessing and Mitigating the Risk of SIT Non-Compliance; Cost of Administering SIT.
Rechargeable costs and value for money	The Scottish Government must meet net additional costs incurred by HMRC, and HMRC should evidence those costs fairly and accurately.	Cost of Administering SIT.
Continuous improvement	HMRC is committed to continuous improvement in its operation of Scottish Income Tax, where improvements are possible and cost effective.	What Changed in 2025 to 2026; Taxpayer Experience; Future Work subsections across Assurance.

Annex A: Findings from Third Party Data Assurance Exercise

Table 1: Outcome of the third-party data assurance exercise

GB Group Unmatched Records:
Removed by KAI	Matched by KAI	Total Matched by GBG and KAI (% matched total)
Duplicates	5,642
Matched to Scotland	1,164,689
Matched to Scotland	5,207,832 (95.12%)
Deceased	2,597	Matched to Ruk	10,361
Matched to Ruk	13,972 (0.26%)
Under 18	99,601
Unmatched	253,006
Unmatched	253,006 (4.62%)
Resident Abroad	16,890

*Where ‘adjusted total’ refers to the initial number of Scottish individuals with duplicates, deceased, those aged under 18 and those resident abroad removed, which is 5,474,810 in this instance.

Table 2: Number of Disagreements between KAI and Third-Party Data Sources

Year	Number of Scottish records matched to rUK third-party address	Number of rUK records matched to Scottish third-party address
2019	4,009	4,578
2021	5,108	3,239
2023	5,167	3,373
2024	4,287	2,730
2025	3,611	2,189

Methodology

KAI sent GB Group approximately 91 million records sourced from CID (Citizen Identification Framework), as part of assurance of HMRC address data.

In order to provide assurance of HMRC address data, GB Group performed a matching exercise of the CID records against third party data sources, e.g., the electoral register and credit records.

Following the completion of this exercise, GB Group sent KAI reports outlining the number of records successfully matched to a country, the number of contradictory address records (by country) and the number of records that are not matched to any address in third party data.

Alongside this report, GB Group sent KAI a list of NINOs (National Insurance numbers) and TRNs (Temporary Reference numbers) ^{[footnote 1]} that did not match to a third-party source.

KAI seek to corroborate these records and identify their most recent address/country information in HMRC tax data. This is performed by:

• removing duplicate NINO’s and TRN’s from the initial list
• matching the records to a number of HMRC systems such as CESA/NPS and RTI to identify: deceased individuals, individuals under 18 and individuals residing abroad
• records which are identified as deceased, under 18 or residing abroad are removed from the initial unmatched list
• remaining records that match to HMRC systems are assigned to a region/country based upon a valid postcode and the corresponding GOR (region) /ITL2 region associated with the postcode. This is obtained by matching extracted postcodes to a postcode lookup table for GOR Codes and assigning a corresponding Income Tax Regime region based on the first letter of this variable

Results – GB Group Matching Exercise

Of 5,599,540 Scottish records:

• 4,043,143 (72.20%) records were matched to a Scottish address that had a Scottish address in CID.
• 3,611 (0.06%) records were matched to an rUK address but had a Scottish address in CID.
• 1,552,786 (27.73%) Scottish records were not matched to any address.

For the 3,611 records that were matched to an rUK address, a letter was sent to the individual asking them to update their address data.

GB Group also found 2,189 records in the CID data with an rUK address but matched to a Scottish address in the third-party data – these individuals were also sent a letter asking them to update their address. For this exercise, we have treated these cases as Scottish residence.

Results – KAI Matching Exercise

As outlined, KAI matched the 1,552,786 uncorroborated records to HMRC systems and:

• removed 5,642 duplicate NINO’s/TRN’s from the initial list
• removed 99,601 records where the individual was under the age of 18 when the assurance exercise was carried out:
  • Of these individuals: 84 were under 16, 50,490 were 16 and 49,027 were 17
• removed 16,890 records where the individual was identified as residing abroad
• removed 2,597 records where the individual was identified as deceased
• identified 1,164,689 records where the individual had a Scottish GOR Code (81.56% of the initial, adjusted unmatched list - 1,428,056)
• identified 10,361 records where the individual had an rUK GOR Code
• we were unable to corroborate 253,006 records. Of these:
  • 245,834 (97.17%) were TRNs which is 4.49% of the original list of 5,474,810 Scottish individuals send to GB Group (with duplicates, deceased and overseas cases excluded)
  • 7,172 (2.83%) were NINOs but of these, 6,415 do not have a postcode assigned to them while another 728 cases show invalid postcodes

See table 1 for further detail. 

Conclusion

After the completion of both KAI’s and GB Groups’ components of this third-party matching exercise, it is shown that HMRC’s taxpayer status for Scottish residing taxpayers was correct in 95.12% of cases (when duplicates, deceased, under 18 and overseas cases are excluded). However, when considering cases where a match was made, 5,207,832 out of 5,221,804 cases were matched as Scottish (99.73 % of the matched total).

Therefore, across the 2 stages, only 0.27% of these records were identified as residing in rUK when CID provided a Scottish address. And just 253,006 (4.52%) of the total Scottish list in CID remain uncorroborated, with most (97.17%) of these being TRNs.

When considering this figure in the context of the overall accuracy of HMRC’s identification of Scottish taxpayers it is important to bear in mind that this population does not correspond to distinct, active Scottish taxpayers in any single given year. It represents records (as opposed to individuals) held in HMRC’s CID data, which could be historic accounts that are no longer active; or TRNs which belonged to individuals that have subsequently been allocated a NINO. So, an uncorroborated taxpayer status doesn’t mean an incorrect taxpayer status.

We are therefore confident that the proportion of correctly identified Scottish cases in HMRC’s data will likely be around 98%-99% when we only consider records which are currently active in SA or RTI. The uncorroborated cases are likely to be in respect of ceased or inactive accounts which explains why KAI have been unable to identify them in either the SA or RTI data. There may also be some cases where postcode information has been incorrectly input, or an expired postcode has been input meaning that a GOR Code cannot be allocated to the record. There is no risk to SIT of failing to corroborate these records as Scottish since there will be no Income Tax liability for them.

This gives confidence that HMRC has correctly identified around 99% of currently active Scottish taxpayers from our CID data as living in Scotland.          

Annex B: Scottish and Welsh Income Tax Codes

Background

The Data Quality Team within the Chief Data Office were commissioned by Operational Excellence and Policy to build a Power BI report to provide information on Scottish (‘S’) and Welsh (‘C’) Income Tax codes.

The key aims of the report were to:

1. Show the size of the employers, pension administrators and third parties that are not operating the ‘S’ or ‘C’ codes correctly i.e. is the error made predominantly by small, medium, or large employers, pension administrators and third parties?
2. What sectors are these employers, pension administrators and third parties in that do not operate the ‘S’ or ‘C’ codes correctly?
3. Is it the same employers, pension administrators and third parties across the years that incorrectly apply ‘S’ or ‘C’ codes?
4. Does the S’ or ‘C’ code error affect high-rate taxpayers or low-rate taxpayers?
5. What software product name and version are used, and which ones are causing the most discrepancies?

Upon analysis of the data, further aims were added:

1. The employers, pension administrators and third parties who have No Net Liability (NNL) employees and are not operating the ‘S’ or ‘C’ codes correctly.
2. Employments that have had a P6/P9 code issued within the last 60 days and the associated employers, pension administrators and third parties, business sizes and products not operating the ‘S’ or ‘C’ codes correctly.

As National Insurance and PAYE System, NPS, is regarded as the master of citizen data for HMRC, when looking at discrepancies within this report, it will be focused on where NPS is showing the employment/payment to be on Scottish or Welsh income tax code and Real Time Information, RTI, to not be showing as Scottish or Welsh.

Financial Years 2023, 2024, 2025, 2026 and year to date, YTD, 2027 (6th April – 20th June) were used for this analysis. Within this report, when looking at specific scenarios, visuals will be for YTD 2026.

Payment Level

To determine the scale of the problem initially, data was kept at payment level, this means it was showing the tax code each time someone got paid. For example, if someone works at 2 companies and gets paid monthly, they will appear 24 times within a financial year worth of data.

This view was chosen as there is potential that an employee could have the incorrect tax code for a percentage of the year and the correct tax code for the other percentage. For example, someone who is paid monthly could have 11 payments with the correct tax code and 1 month on the incorrect tax code. Results for each financial year are shown in Figure 1 and Figure 2.

Figure 1: Breakdown of the number of payments across the Tax Years and the associated match status (note)

Match Status	2023	2024	2025	2026	2027
Neither Tax Code Present	689,461,409	690,523,874	687,341,303	579,449,781	233,461,200
NPS Scottish/RTI Not	2,165,544	2,156,162	2,019,521	1,441,533	542,889
NPS Welsh/RTI Not	2,101,090	2,057,998	2,006,752	1,431,654	540,820
RTI Scottish/NPS Welsh	2,594	2,761	2,874	1,463	598
RTI Scottish/NPS Not	240,512	213,774	208,823	136,454	60,308
RTI Welsh/NPS Scottish	2,633	2,627	3,116	1,573	608
RTI Welsh/NPS Not	159,823	145,115	139,894	78,419	32,052
Scottish Tax Code Match	64,233,458	64,648,900	64,619,770	54,435,035	22,265,320
Welsh Tax Code Match	34,428,692	34,484,882	34,244,918	29,348,145	11,811,578
Total	792,795,755	794,236,093	790,586,971	666,324,057	268,715,373

Note: 2027 YTD (6 April – 19 to 6 August 2026) and Neither Tax Code Present was not used in the remainder of the report visuals. For definition of each match status please see definitions.

Figure 2: Breakdown of the number of payments across the Tax Years and the associated match status (note)

Match status	Number of payments 2023 (millions)	Number of payments 2024 (millions)	Number of payments 2025 (millions)	Number of payments 2026 (millions)	Number of payments 2027 (millions)
Scottish Tax Code Match	64	65	65	63	22
Welsh Tax Code Match	34	34	34	34	12
NPS Scottish/RTI Not	2	2	2	2	1
NPS Welsh/RTI Not	2	2	2	2	1
RTI Scottish/NPS Not	0	0	0	0	0
RTI Welsh/NPS Not	0	0	0	0	0
RTI Welsh/NPS Scottish	0	0	0	0	0
RTI Scottish/NPS Welsh	0	0	0	0	0

Note: 2027 YTD (6 April 2026 to 6 August 2026). For definition of each match status please see definitions.

Employment Level

When looking at the National Insurance Number, NINo, or Temporary Reference Number, TRN, of an individual we refer to this as the employment level. We can’t assume that an individual only has one employment, so we combine the NINo/TRN with an employment sequence number, which shows the order of an individual’s employment, to represent the individual’s employment(s).

For this analysis, we looked at the employment on their latest payment, this is the last time the individual got paid. For 2027, the data was extracted on 2nd June, so it was the latest payments on or before the 2nd June.

Employers, pension administrators, and third parties

Employers, pension administrators, and third parties were divided into business sizes. Business sizes for this analysis were defined using the Department for Business, Energy and Industrial Strategies definitions, and are defined in Table 1.

Term	Description
Large business	A business with 250 or more employees.
Medium-sized business	A business with 50 to 249 employees.
Small business	A business with 10 to 49 employees.
Micro business	A business with 1 to 9 employees.

In 2026, the number of employers, pension administrators, and third parties is represented in Figure 3. Where an employers, pension administrators, and third parties employment size couldn’t be determined this is represented by blank.

Large businesses represent 74.91% of the employers, pension administrators, and third parties administrating Scottish/Welsh tax codes.

Figure 3: Percentage split of employers, pension administrators, and third parties business sizes administrating Scottish/Welsh tax codes for 2027 YTD (6 April 2026 to 6 August 2026).

Business size	Percentage
Large business	74.91%
Medium-sized business	8.73%
Small business	9.05%
Micro business	7.31%

For match category, NPS Scottish/RTI not, shown in Figure 4, large businesses represent the greatest number of discrepancies, 24.60%, with micro business representing the next, 33.14%. For match category, NPS Welsh/RTI not, shown in Figure 5, large businesses represent the greatest number of discrepancies, 33.15%, with micro businesses representing the next, 31.4%.  

Figure 4: Percentage split of employers, pension administrators, and third parties business sizes who show NPS as Scottish income code and RTI is not for 2027 YTD (6 April 2026 to 6 August 2026).

Business size	Percentage
Large business	24.60%
Medium-sized business	12.36%
Small business	29.89%
Micro business	33.14%

Sectors

UK Standard Industrial Classification of Economic Activities from the Office for National Statistics data was used within this analysis. There were 19 sectors that were identified who utilise Scottish and Welsh income tax codes, and during the analysis and there were several schemes that couldn’t be matched, these are represented by blank or no sector found. Definitions for the sectors and their associated letters are shown in Table 2, and the split of sectors administrating Scottish/Welsh tax codes is shown in Figure 6.

Table 2: Definitions for sectors and their associated letters

Description	Sector
Agriculture, Forestry and Fishing	A
Mining and Quarrying	B
Manufacturing	C
Electricity, Gas, Steam and Air Conditioning Supply	D
Water Supply; Sewerage, Waste Management and Remediation Activities	E
Construction	F
Wholesale And Retail Trade; Repair of Motor Vehicles and Motorcycles	G
Transportation and Storage	H
Accommodation and Food Service Activities	I
Information and Communication	J
Financial and Insurance Activities	K
Real Estate Activities	L
Professional, Scientific and Technical Activities	M
Administrative and Support Service Activities	N
Public Administration and Defence; Compulsory Social Security	O
Education	P
Human Health and Social Work Activities	Q
Arts, Entertainment and Recreation	R
Older SIC that was used as a placeholder for unspecified activities no longer standard practice	Z

Figure 5: Percentage split of sectors administrating Scottish/Welsh tax codes for 2027 YTD (6 April 2026 to 6 August 2026)

Sector	Sum of number of employments
Blank	2,330,910
No Sector Found	8,45,271
Financial and Insurance Activities	731,022
Professional, Scientific and Technical Activities	571,334
Administrative and Support Service Activities	552,634
Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles	460,316
Real Estate Activities	267,537
Electricity, Gas, Steam and Air Conditioning Supply	254,381
Arts, Entertainment and Recreation	231,639
Transportation and Storage	172,326
Public Administration and Defence; Compulsory Social Security	149,028
Accommodation and Food Service Activities	130,908
Construction	126,860
Information and Communication	104,294
Water Supply; Sewerage, Waste Management and Remediation Activities	37,803
Agriculture, Forestry and Fishing	26,184
Education	12,810
Manufacturing	11,783
Mining and Quarrying	3,259
Older SIC that was used as a placeholder for unspecified activities no longer standard practice	2,066
Human Health and Social Work Activities	204

Those not assigned to a sector accounted for the most discrepancies for both NPS Scottish or NPS Welsh, and the Financial and Insurance Activities sector, Sector K, accounts for the second most discrepancies for NPS Scottish or NPS Welsh, both shown in Figure 7 and 8.

Figure 6: Percentage split of sectors who show employment as NPS Scottish income code and RTI is not for 2027 YTD (6 April 2026 to 6 August 2026).

Sector	Sum of Number of Employments
No Sector Found	43,194
Financial and Insurance Activities	15,435
Blank	13,998
Wholesale And Retail Trade; Repair of Motor Vehicles and Motorcycles	7,341
Transportation and Storage	3,828
Administrative and Support Service Activities	3,362
Public Administration and Defence; Compulsory Social Security	3,272
Professional, Scientific and Technical Activities	2,525
Electricity, Gas, Steam and Air Conditioning Supply	2,135
Construction	1,487
Arts, Entertainment and Recreation	1,342
Accommodation and Food Service Activities	1,168
Agriculture, Forestry and Fishing	991
Real Estate Activities	862
Older SIC that was used as a placeholder for unspecified activities no longer standard practice	564
Information and Communication	385
Education	338
Manufacturing	78
Water Supply; Sewerage, Waste Management and Remediation Activities	56
Mining and Quarrying	43
Human Health and Social Work Activities	5

Those not assigned to a sector accounted for the most discrepancies for both NPS Scottish or NPS Welsh, and the Financial and Insurance Activities sector, Sector K, accounts for the second most discrepancies for NPS Scottish or NPS Welsh, both shown in Figure 7 and 8.

High-rate Taxpayers and Low-rate Taxpayers

For the purposes of this analysis, taxpayers were split into 2 bands, high taxpayer and lower taxpayer, the definitions are defined below in Table 3 and the split of taxpayer types assigned Scottish/Welsh tax codes is shown in Figure 9.

Table 3: High taxpayer and lower taxpayer bands

Definition	Individual with a taxable income of
Scottish Higher Rate Taxpayer	£43,000 and over
Scottish Lower Rate Taxpayer	£42,999 and under
Welsh Higher Rate Taxpayer	£50,000 and over
Welsh Lower Rate Taxpayer	£49,999 and under
Scottish/Welsh Taxpayer	Individual not notably liable to pay tax

For discrepancies for Scottish and Welsh income tax codes, Figure 10 and 11, low taxpayers account for most of the discrepancies, 87.24% and 88.79% respectively.

Figure 7: Percentage split of taxpayer types who have been assigned Scottish/Welsh tax codes for 2027 YTD (6 April 2026 to 6 August 2026)

Tax Payer Category	Number of Employments
Scottish Low Tax Payer	4,291,362
Welsh Low Tax Payer	2,302,812
Scottish NNL Tax Payer	110,283
NPS Scottish Low Tax Payer	89,483
NPS Welsh Low Tax Payer	85,878
Welsh NNL Tax Payer	62,636
Scottish High Tax Payer	33,390
NPS Scottish NNL Tax Payer	12,642
NPS Welsh NNL Tax Payer	10,355
RTI Scottish Low Tax Payer	8,941
Welsh High Tax Payer	7,442
RTI Welsh Low Tax Payer	4,758
RTI Scottish NNL Tax Payer	1,002
RTI Welsh NNL Tax Payer	767
NPS Scottish High Tax Payer	284
NPS Welsh High Tax Payer	130
RTI Scottish High Tax Payer	128
NPS Welsh/RTI Scottish Low Tax Payer	109
NPS Scottish/RTI Welsh Scottish Low Tax Payer	96
NPS Scottish/RTI Welsh Scottish NNL Tax Payer	26
NPS Welsh/RTI Scottish NNL Tax Payer	24
RTI Welsh High Tax Payer	14
Neither Tax Code Present	6
NPS Welsh/RTI Scottish High Tax Payer	1

Figure 8: Percentage split of taxpayer types who show NPS as Scottish income code and RTI is not for 2027 YTD (6 April 2026 to 6 August 2026)

Tax Payer Category	Number of Employments
NPS Scottish Low Tax Payer	89,483
NPS Scottish NNL Tax Payer	12,642
NPS Scottish High Tax Payer	284

No Net Liability

As mentioned, Operational Excellence began carrying out root-cause on the employers causing discrepancies. During this sampling period it was identified that No Net Liability, NNL, taxpayers, those individuals not notably liable to pay tax, could be leading to some of the discrepancies, so a flag identifying those individuals was added to understand what proportion of NNL employments there were, these are also shown in Figure 10 and 11.

Software

Software is defined as what employers, pension administrators and third parties use to file RTI data using either third-party software or, if they have 9 or less employees, they can use HMRCs free Basic PAYE Tools (BPT).

Additional Insight

During analysis, it was identified that the country code found on National Insurance and PAYE System, NPS, may be leading to some of the discrepancies. Further analysis has been commissioned to investigate whether this is one of the root causes for the discrepancies.

In addition, colleagues from Operational Excellence were given a random sample of 100 employers who had been issued a P6/P9 code and their associated employees causing the discrepancies. A control group of 100 different employers were chosen to allow to compare to begin root-causing. This information is not included in this report.

Country Code Analysis

Taxpayers are assigned a country of residence flag within NPS. Figure 12 shows the percentage split of employments’ assigned country code who have Scottish/Welsh tax codes assigned.

Figure 9: Percentage split of employments assigned country code who have Scottish/Welsh tax codes assigned for 2027 YTD (6 April 2026 to 6 August 2026)

Country code	Sum of Number of Employments
Great Britain	4,052,122
Scotland	1,773,526
Wales	911,314
England	192,191
Not Specified or Not Used	89,853
Other	3,157
Northern Ireland	381
Isle of Man	25

Figure 10 shows the percentage split of employments assigned country code who show NPS as Scottish income code and RTI is not. It shows that 65.56% of the employments who had NPS assigned a Scottish income code and RTI not had a Great Britain country code assigned. Figure 14 shows the percentage split of employments assigned country code who show NPS as Welsh income code and RTI is not. It shows that 64.8% of the employments who had NPS assigned a Welsh income code and RTI not had a Great Britain country code assigned.

Employments should not be assigned a Great Britain or United Kingdom country code, and analysis suggests these could be the reason for some of the discrepancies.

Figure 10: Percentage split of employments assigned country code who show NPS as Scottish income code and RTI is not for 2027 YTD (6 April 2026 to 6 August 2026)

Country code	Sum of Number of Employments
Great Britain	69,031
Scotland	27,417
Not Specified or Not Used	3,733
England	2,041
Other	142
Northern Ireland	23
Wales	22

Further Analysis

Some of the identified findings from the Operational contact with employers, filters for these have been added to the report but require further analysis is required into:

• which payments are causing the most discrepancies (such as one-off payments)
• whether more discrepancies are caused by employments or pensions
• whether more discrepancies are caused by after leaving payments
• whether No Net Liability taxpayers are causing the most discrepancies

A process improvement will be implemented in the coming months to prevent GB being used as a country code, to see if this will help solve some of the tax code discrepancies.

Definitions

Throughout the report the below definitions will be used:

NPS	National Insurance and PAYE System (was previously called NIRS) is the strategic platform for income tax for individuals, primarily concerned with the administration of National Insurance and Income Tax via Pay As You Earn (PAYE), (the HMRC administered elements of) Student Loans, Claims cases, Child Benefit and Tax-Free Childcare eligibility. NPS is regarded as the master of citizen data for HMRC.
RTI	Real Time Information System is the HMRC system that employers submit payroll data through to HMRC
Scottish Income Tax Code	You pay Scottish Income Tax if you reside in Scotland for more than 183 days in a year (From 6th April of the given tax year). You may also pay Scottish Income Tax if you: move to or from Scotland, live in a home in Scotland and one elsewhere in the UK, for example for work, do not have a home and stay in Scotland regularly, for example you stay offshore or in hotels, rates show here. S1257L.
Welsh Income Tax Code	You pay Welsh Income Tax if you if you reside in Wales for more than 183 days in a year (From 6th April of the given tax year). You may also pay Welsh Income Tax if you: move to or from Wales, live in a home in Wales and one elsewhere in the UK, for example for work, do not have a home and stay in Wales regularly, for example you stay offshore or in hotels, rates show here. C1257.
Scottish Tax Code Match	Both RTI and NPS Match as Scottish Tax Code.
RTI Scottish/NPS Welsh	RTI showing as Scottish Tax Code and NPS as Welsh Tax Code.
RTI Welsh/NPS Scottish	RTI showing as Welsh Tax Code and NPS as Scottish Tax Code.
Welsh Tax Code Match	Both RTI and NPS Match as Welsh Tax Code.
NPS Scottish/ RTI Not	NPS showing as Scottish Tax Code and RTI as regular Tax Code.
NPS Welsh/ RTI Not	NPS showing as Welsh Tax Code and RTI as regular Tax Code.
RTI Welsh/ NPS Not	RTI showing as Welsh Tax Code and NPS as regular Tax Code.
RTI Scottish/ NPS Not	RTI showing as Scottish Tax Code and NPS as regular Tax Code.
Other Tax Code	Tax codes that are not Scottish/Welsh.
Payment Level/Payments	The data used throughout the insight is at payment level, it is showing the tax code each time someone gets paid. This is split at their employment level i.e. if Joe Bloggs works at 2 companies and gets paid monthly, they will appear 24 times within a financial year worth of data.
Employment Level/Employments	If Joe Bloggs works at 2 companies, irrespective of their payment frequency as long as have received a payment for both jobs, they will appear twice within a financial year worth of data.
Occupational Pension (OPCN – Occupational Pension Contribution)	Used when any pension provider makes pension payments.
Scottish High Taxpayer	Earns £43,000 and over.
Scottish Low Taxpayer	£42,999 and under.
Welsh High Taxpayer	£50,000 and over.
Welsh Low Taxpayer	£49,999 and under.
For this insight the size of the employers, pension administrators and third parties were determined by how many staff they employ:
Large	250 employees or more.
Medium	50 to 249 employees.
Small	10 to 49 employees.
Micro	1 to 9 employees.

Annex C: Annual Business Intelligence Report 2025 to 2026

Customer Contact: Telephone

HMRC has a SIT telephone route within the HMRC Personal Tax helpline. This gives customers generic, pre-recorded SIT messages prior to speaking to an HMRC customer adviser. These figures do not represent all calls by Scottish taxpayers to HMRC.

Phone Calls Received and Answered

Calls	2025-26	2024-25	2023-24	2022-23	2021-22	2020-21
Calls received	86	199	339	263	195	141
Calls answered	73	133	235	193	164	110

Customer Contact: Complaints

HMRC tracks all SIT customer complaints to ensure they are processed within the HMRC customer service targets. These figures do not represent all customer complaints received from Scottish taxpayers.

Customer Complaints and Response Targets

Complaints and response target	2025-26	2024-25	2023-24	2022-23	2021-22	2020-21
Number of complaints	12	19	31	34	39	45
15 day response target (80%) met	6	76%	70%	71%	47.5%	57%

Web Pages Monitored

HMRC has several SIT-related webpages on GOV.UK and hits to these pages are monitored:

• Income Tax in Scotland
• Guidance: work out if you’ll pay SIT
• Internal manual: SIT guidance
• Tell HMRC about a change in personal details, which is used by customers across the UK

Web Hits

GOV.UK web page	2025-26	2024-25	2023-24	2022-23	2021-22	2020-21
Income Tax in Scotland	197,526	203,347	245,859	346,915	245,829	266,882
If you move to or from Scotland​	5,858	11,465	15,513	13,182	5,949	6,786
Internal manual: Scottish taxpayer guidance	5,351	356	509	862	847	1,013
Tell HMRC about a change to your personal details	596,495	754,848	1,072,096	1,307,931	1,332,067	1,530,708

Annex D: Metrics Dictionary

This annex defines the headline metrics used in this report and explains their scope, source and any important caveats. It is intended to support consistent interpretation of the figures presented in Scottish Income Tax at a Glance and elsewhere in the report.

Metric	Definition	Source	Limitations
Scottish taxpayers identified	The number of individuals recorded by HMRC as Scottish taxpayers for the relevant reporting period.	Derived from the Scottish Income Tax Outturn Statistics – 2024 to 2025.	This is an administrative count rather than a definitive population measure of Scottish residents. Status depends on the address and residency information held by HMRC at the time of reporting.
Non-Saving/Non-Dividend Income Tax generated by Scottish taxpayers	The amount of Non-Saving/Non-Dividend Income Tax attributable to Scottish taxpayers and therefore to the Scottish Government budget.	Produced through HMRC’s outturn methodology using PAYE and Self Assessment data, with a small estimated component where final liabilities are not yet fully established.	A small proportion of the figure is estimated to support timely reporting. Final liabilities for some taxpayers continue to crystallise after the end of the tax year.
SIT Board meetings held	The number of formal Scottish Income Tax Board meetings held during the reporting year.	Taken from governance records for HMRC and Scottish Government.	This metric reflects meeting frequency only and does not, by itself, capture the scope or impact of the Board’s work. It also does not capture additional ad-hoc meetings.
Compliance Working Group meetings held	The number of formal Compliance Working Group meetings held during the reporting year.	Taken from governance records for HMRC and Scottish Government.	This metric reflects meeting frequency only and does not, by itself, capture the scope or impact of the Group’s work. It also does not capture additional ad-hoc meetings.
Letters sent as part of the third-party data assurance exercise	The number of letters issued to individuals whose address information required confirmation or update following the third-party data assurance exercise.	Drawn from the annual third-party data assurance exercise and associated operational follow-up activity.	The number of letters sent is an activity measure. It does not, on its own, indicate how many records were subsequently corrected or how much tax was at risk.
Pieces of data analysis published	The number of analytical publications or formal analysis outputs on Scottish Income Tax published during the reporting year.	Based on HMRC analytical outputs published in support of Scottish Income Tax governance, transparency or policy work.	This metric measures output volume, not the relative scale, complexity or policy significance of each publication.
Calls to the Scottish Income Tax telephone line	The number of calls to the Scottish Income Tax telephone line.	Taken from HMRC administrative data.	The figures do not represent all calls made by Scottish taxpayers to HMRC.
Scottish Self Assessment tax returns received	The number of Self Assessment tax returns received from taxpayers recorded as Scottish taxpayers.	Taken from HMRC Self Assessment administrative data for the relevant return cycle.	Return volumes may reflect timing effects, late filing and status changes. They do not represent the full Scottish taxpayer population because many taxpayers are dealt with solely through PAYE.
Guidance products updated	The number of guidance products reviewed and updated to reflect the SIT rates, bands, processes or supporting information applicable in the reporting year.	Drawn from HMRC content and guidance maintenance activity, including updates made ahead of the start of the tax year.	The count measures updated products rather than the scale of the changes made to each product.
Invalid or blank postcodes updated	The number of invalid or blank postcode records corrected through address assurance activity during the reporting year.	Taken from HMRC address assurance scan activity and related data quality corrections.	This is a data quality activity measure and should not be interpreted as the number of taxpayers incorrectly identified overall.
Number of postcodes updated	The number of postcode changes incorporated into HMRC’s residency and postcode reference processes, including new or revised postcodes received from the Office for National Statistics.	Based on quarterly Office for National Statistics postcode updates and HMRC process updates.	This metric reflects maintenance of postcode reference data rather than direct changes to individual taxpayer residency status.

1. A Temporary Reference Number (TRN) is a number that is allocated by HMRC to records that do not have a matched or known National Insurance Number (NINO). TRNs take the format ‘NN LN NN NN’ (2 numbers, a letter, 5 numbers). TRNs are usually replaced when an individual applies for a NINO from DWP. However, a small number of individuals retain a TRN. ↩