Scottish Income Tax Outturn Statistics: 2019 to 2020
Updated 4 January 2022
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1. Overview
The aim of these Experimental Statistics is to provide users with information of interest in relation to the Scottish Income Tax (SIT) outturn. This details non-savings non-dividends (NSND) Income Tax for Scottish taxpayers.
This publication also shows:
- how many Scottish taxpayers are liable at each rate of tax
- the Scottish outturn amount at each rate of tax
- an estimate for how much NSND income tax paid by Scottish taxpayers is collected via Pay As You Earn (PAYE) and how much via payments made in Self Assessment (SA)
Additionally, the statistical tables released alongside this bulletin also provide equivalent information for the rest of the UK (rUK) taxpayers on the same basis so comparisons can be made. References to tables throughout this bulletin refer to the statistical tables released alongside this bulletin, not the tables within the bulletin.
1.1 What does it mean that these are Experimental Statistics?
Experimental Statistics are statistics that are within their development phase and are published in order to involve potential users at an early stage in building a high-quality set of statistics that meet user needs.
The Experimental Statistics label highlights to users that HM Revenue and Customs (HMRC) are still working on further developing the style and content for the tables and commentary in this publication.
It should be emphasised that the label of Experimental Statistics does not mean that the statistics are of low quality, but it does signify that the statistics are novel and what statistics are reported and how is still being developed.
2. Main Findings
2.1 Note on the definition of ‘rUK’
From 2019 to 2020, a proportion of Income Tax paid by taxpayers living in Wales will be transferred to the Welsh Government through the introduction of the Welsh Rates of Income Tax (WRIT). These are controlled by the Welsh Government (WG). HMRC publishes separate statistics on Welsh Income Tax. This means it is no longer appropriate to include Welsh NSND Income Tax when comparing Scottish NSND Income Tax growth to rUK NSND Income Tax growth.
For the purpose of indexing the Scottish Block Grant Adjustment (BGA) changes in the geographical coverage have to be introduced with a one year delay. This is set out in the Fiscal Framework Technical Note.
This is necessary because there will be no 2018 to 2019 outturn figure for England and Northern Ireland (ENI) Income Tax receipts only as this pre-dates the devolution of Welsh Income Tax. Without this figure, it is not possible to measure the growth between 2018 to 2019 and 2019 to 2020 ENI Income Tax receipts, which would be needed to calculate a 2019 to 2020 Scottish BGA based on ENI only. This means that the 2019 to 2020 BGA will still be indexed using growth in receipts and population data for England, Wales and Northern Ireland in 2019 to 2020.
These statistical tables therefore contain 2019 to 2020 rUK figures on two measures (labelled ‘post-Welsh tax devolution basis’ and ‘pre-Welsh tax devolution basis’) which have two key differences. For the ‘post-Welsh tax devolution basis’ measure:
- NSND Income Tax for Welsh taxpayers is not included
- a new methodology of calculating PAYE established liability has been introduced – please see section 7.2 for more information on this
The ‘pre-Welsh tax devolution basis’ of the rUK outturn will be used by HM Treasury to calculate and agree with the Scottish Government (SG) the 2019 to 2020 BGA reconciliation, which will apply to the 2022 to 2023 Scottish Budget (as this allows the 2018 to 2019 and the 2019 to 2020 rUK outturns to be based on consistent methodologies). The ‘post-Welsh tax devolution basis’ of the rUK outturn will be used by HM Treasury to calculate the 2020 to 2021 BGA reconciliation, which will apply to the 2023 to 2024 Scottish Budget (as this allows the 2019 to 2020 and 2020 to 2021 rUK outturns to be based on consistent methodologies).
All commentary related to rUK figures in this statistical bulletin refers to the ‘pre-Welsh tax devolution basis’.
2.2 Scottish Income Tax 2019 to 2020
The main findings of these statistics are:
- the total amount of NSND Income Tax for Scottish taxpayers in 2019 to 2020 was £11,833 million – an increase of 2.4% compared to 2018 to 2019
- the total amount of NSND Income Tax for rUK taxpayers in 2019 to 2020 was £164,372 million – an increase of 2.3% compared to 2018 to 2019
- the total number of Scottish taxpayers in 2019 to 2020 was 2,526,000 – an increase of 0.1% compared to 2018-29
- the total number of rUK taxpayers in 2019 to 2020 was 28,404,000 – an increase of 0.2% compared to 2018 to 2019
- the Scottish share of UK NSND Income Tax was unchanged at 6.7% for 2019 to 2020
3. Background
3.1 Definitions of ‘non-savings non-dividends’
The statistics in Tables 1 to 3 provide information about Income Tax due on NSND income. NSND income includes earnings from employment, pensions, profits from self-employed sources and property.
Only Income Tax due on NSND income is devolved to Scotland. These tables provide a comparison of how NSND Income Tax for Scotland taxpayers compares to that of taxpayers in rUK.
Tax on NSND income in these tables is measured as the Income Tax liability expected to be collected by HMRC. There is also an adjustment to reflect reliefs which are not allocated to individual taxpayer accounts.
Taxpayers in these tables are defined as individuals who have some Income Tax liability on NSND income after reliefs have been applied to reduce Income Tax. In Table 2 taxpayers have been assigned to a tax rate based solely on their NSND Income Tax and it is possible that they have paid tax at a Higher rate on their savings/dividend income.
3.2 Established liabilities and where tax is paid
Employers and pension providers must normally operate PAYE as part of their payroll. PAYE is HMRC’s system to collect Income Tax and National Insurance (NI) from employments and is largely paid in the same year as the taxable activity. When an employer pays their employees through payroll, they also need to make tax and NI deductions for PAYE. Employers are then obliged to report the amount of these payments and deductions to HMRC as well as paying the tax and NI deducted to HMRC.
An individual is required to file a Self Assessment (SA) return if they meet certain criteria. This is required even for individuals who are also present in PAYE if a requirement for filing in SA is met. SA returns are generally submitted in the year after the taxable activity has taken place.
For the outturn calculation, an individual who files in SA will have all their Income Tax liability established in SA when they submit their return, even if they have had some tax deducted through PAYE. An individual who is not required to file in SA will have their liability established in PAYE when their information is reconciled each year under the National Insurance and PAYE Service (NPS).
Table 3 shows whether established NSND liabilities are paid through PAYE or SA. This split in Table 3 is different to how established liabilities are split between PAYE and SA in Table 1. For example, for an individual with self-employment income who files an SA return, if they have tax deducted through a PAYE scheme then Table 3 will reflect those corresponding liabilities as paid separately
4. Scottish NSND Income Tax outturn and rUK comparison
Please note all commentary related to rUK figures in this statistical bulletin refers to the ‘pre-Welsh tax devolution basis’. See section 2.1 for more details.
4.1 Outturn components
Table 1 of the statistical release shows how each component of the outturn is combined to calculate the figure for the total NSND Income Tax for Scottish taxpayers. We also see how this compares to rUK.
The largest components of the outturn are SA Established Liability and PAYE Established Liability. More NSND Income Tax liability is established through PAYE in Scotland while more is established through SA for rUK. This could be caused by a higher proportion of rUK taxpayers submitting Self Assessment returns.
There has been stronger growth in PAYE Established Liability for NSND Scottish Income Tax (3.9%) compared to SA Established Liability (1.9%) while the opposite is true for rUK (4.5% in SA Established Liability compared to 1.2% in PAYE Established Liability)
Figure 1: NSND Income Tax for Scottish taxpayers, 2018 to 2019 and 2019 to 2020
Table 1: NSND Income Tax for Scottish taxpayers, 2018 to 2019 and 2019 to 2020
| 2018 to 2019 Scottish NSND Income Tax | 2019 to 2020 Scottish NSND Income Tax | |
|---|---|---|
| SA Established Liability | £4,954 million | £5,049 million |
| PAYE Established Liability | £6,587 million | £6,845 million |
| Estimated further Liability | £366 million | £307 million |
| Adjustment for uncollectable amounts | -£89 million | -£89 million |
| Relief at Source (RAS) | -£156 million | -£172 million |
| Gift Aid | -£105 million | -£108 million |
| Total | £11,556 million | £11,833 million |
Figure 2: NSND Income Tax for rUK taxpayers, 2018 to 2019 and 2019 to 2020
Table 2: NSND Income Tax for rUK taxpayers, 2018 to 2019 and 2019 to 2020
| 2018 to 2019 rUK NSND Income Tax | 2019 to 2020 rUK NSND Income Tax | |
|---|---|---|
| SA Established Liability | £89,095 million | £93,116 million |
| PAYE Established Liability | £69,774 million | £70,646 million |
| Estimated further Liability | £6,237 million | £5,526 million |
| Adjustment for uncollectable amounts | -£1,321 million | -£1,632 million |
| Relief at Source (RAS) | -£1,790 million | -£2,010 million |
| Gift Aid | -£1,245 million | -£1,275 million |
| Total | £160,750 million | £164,372 million |
4.2 Tax liabilities by band – all NSND Income Tax
Table 2 of the statistical release provides breakdowns of all NSND Income tax liabilities by tax band and taxpayer types (defined by their highest marginal rate).
There was an increase in the proportion of Higher rate taxpayers in Scotland (14.1% in 2019 to 2020 compared to 12.8% in 2018 to 2019) while this proportion dropped for rUK (11.0% compared to 12.2%). This is likely caused by the changes in the band thresholds for Scotland and rUK (see section 6.3 for more details).
The amount of tax paid by Top rate taxpayers decreased slightly in Scotland between 2018 to 2019 and 2019 to 2020 in these statistics. This is partly due to a change in methodology affecting how some estimated Income Tax liabilities from late filed SA returns are distributed between taxpayer types (defined by their highest marginal rate) in these statistics, see section 7.3 for more details. This methodological change does not affect the total amount of Income Tax paid by all taxpayers in these statistics.
Also, due to Top rate taxpayers paying considerably more tax than the average taxpayer, fluctuations in the income of even a small number of taxpayers can lead to noticeable changes in the total tax collected at that rate.
Figure 3: Share of Scottish and rUK taxpayers by their highest marginal tax rate, 2018 to 2019 and 2019 to 2020
Table 3: Share of Scottish and rUK taxpayers by their highest marginal tax rate, 2018 to 2019 and 2019 to 2020
| 2018 to 2019 Scottish Taxpayers | 2018 to 2019 rUK Taxpayers | 2019 to 2020 Scottish Taxpayers | 2019 to 2020 rUK Taxpayers | |
|---|---|---|---|---|
| Starter Rate Taxpayer | 10.2% | N/A | 9.9% | N/A |
| Basic Rate Taxpayer | 41.3% | 86.6% | 41.5% | 87.8% |
| Intermediate Rate Taxpayer | 35.2% | N/A | 33.9% | N/A |
| Higher Rate Taxpayer | 12.8% | 12.2% | 14.1% | 11.0% |
| Additional/Top Rate Taxpayer | 0.6% | 1.2% | 0.6% | 1.2% |
Table 2 also highlights that although a small proportion (14.6%) of Scottish taxpayers were Higher or Top rate taxpayers, they were liable for 60.3% of NSND income tax in Scotland during 2019 to 2020.
Figure 4: Proportion of total Scottish and rUK NSND Income Tax paid by each taxpayer type, 2018 to 2019 and 2019 to 2020
Table 4: Proportion of total Scottish and rUK NSND Income Tax paid by each taxpayer type, 2018 to 2019 and 2019 to 2020
| 2018 to 2019 Scottish Taxpayers | 2018 to 2019 rUK Taxpayers | 2019 to 2020 Scottish Taxpayers | 2019 to 2020 rUK Taxpayers | |
|---|---|---|---|---|
| Starter Rate Taxpayer | 0.4% | N/A | 0.4% | N/A |
| Basic Rate Taxpayer | 10.4% | 34.1% | 10.2% | 35.7% |
| Intermediate Rate Taxpayer | 30.6% | N/A | 29.1% | N/A |
| Higher Rate Taxpayer | 41.3% | 34.9% | 43.5% | 32.5% |
| Additional/Top Rate Taxpayer | 17.4% | 31.0% | 16.8% | 31.9% |
Similar shifts are seen when looking at the breakdown of total NSND Income Tax into the bands they are paid at. The proportion of tax paid at the higher and Top/Additional rate increased for Scotland between 2018 to 2019 to 2019 to 2020 (40.5% compared to 39.9%) while it decreased for rUK (48.6% compared to 49.7%).
Figure 5: Share of Scottish NSND Income Tax by tax rates, 2018 to 2019 and 2019 to 2020
Table 5: Share of Scottish NSND Income Tax by tax rates, 2018 to 2019 and 2019 to 2020
| 2018 to 2019 Scottish NSND Income Tax | 2018 to 2019 rUK NSND Income Tax | 2019 to 2020 Scottish NSND Income Tax | 2019 to 2020 rUK NSND Income Tax | |
|---|---|---|---|---|
| Starter Rate | 7.7% | N/A | 7.7% | N/A |
| Basic Rate | 28.3% | 50.3% | 28.2% | 51.4% |
| Intermediate Rate | 24.2% | N/A | 23.5% | N/A |
| Higher Rate | 29.5% | 29.6% | 30.8% | 28.0% |
| Additional/Top Rate | 10.4% | 20.1% | 9.7% | 20.6% |
5. Indicative In-Year Scottish Income Tax
5.1 Background
HMRC provides in year monitoring for Scottish Income Tax from Real Time Information (RTI) data to the Scottish Government (SG), Scottish Fiscal Commission (SFC) and the Office for Budget Responsibility (OBR) each month.
Table 4 of this release shows the information HMRC shares as a monthly time series - how much UK tax is collected through employers (as reported in RTI) for the UK and what proportion is from Scottish taxpayers.
The Income Tax measure in Table 4 is not the same as that presented in Tables 1 to 3 as the tax reported in RTI will include amounts for things other than NSND Income Tax. For example, any tax code adjustments for savings income or the High Income Child Benefit Tax Charge (HICBC) and non-taxable employee expenses paid through payroll with tax deducted. Therefore, Table 4 is not directly comparable to Table 1 to 3.
Scottish taxpayers are identified using the Scottish indicator from NPS (see section 6.2 for more details of how Scottish taxpayers are defined in NPS).
These monthly figures will generally not be updated after the end of the tax year.
5.2 Income Tax reported as withheld from RTI
The monthly time series of tax withheld in RTI is relatively similar for Scottish and rUK taxpayers. There is a clear spike in tax in March each year and this reflects when bonuses are generally paid, at the end of the tax year.
There is also a smaller spike in December which is likely to reflect an increase in employment activity around the Christmas holiday period.
Figure 6: RTI Income Tax reported as withheld for Scottish taxpayers, 2018 to 2019 to 2020 to 2021
Table 6: RTI Income Tax reported as withheld for Scottish taxpayers, 2018 to 2019 to 2020 to 2021
| Month | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|
| April | £898 million | £930 million | £912 million |
| May | £864 million | £915 million | £882 million |
| June | £916 million | £954 million | £884 million |
| July | £868 million | £884 million | £895 million |
| August | £863 million | £863 million | £904 million |
| September | £859 million | £914 million | £882 million |
| October | £861 million | £874 million | £930 million |
| November | £848 million | £878 million | £919 million |
| December | £925 million | £970 million | £983 million |
| January | £865 million | £896 million | £960 million |
| February | £898 million | £925 million | £954 million |
| March | £1,163 million | £1,113 million | £1,110 million |
The Scottish share of whole UK RTI Income Tax is similar to last year. The share is relatively consistent across most of the year but decreases towards the end of the tax year. This likely reflects bonus payments forming a smaller proportion of remuneration for Scottish employees compared to rUK.
Figure 7: Scottish share of RTI Income Tax reported as withheld, 2018 to 2019 to 2020 to 2021
Table 7: Scottish share of RTI Income Tax reported as withheld, 2018 to 2019 to 2020 to 2021
| Month | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|
| April | 6.98% | 7.11% | 7.12% |
| May | 7.16% | 7.21% | 7.17% |
| June | 7.22% | 7.31% | 7.04% |
| July | 7.03% | 7.12% | 7.21% |
| August | 7.24% | 7.19% | 7.25% |
| September | 7.10% | 7.42% | 7.04% |
| October | 7.15% | 7.28% | 7.41% |
| November | 7.16% | 7.29% | 7.20% |
| December | 6.94% | 7.22% | 6.98% |
| January | 6.64% | 6.61% | 6.61% |
| February | 6.50% | 6.51% | 6.34% |
| March | 6.44% | 6.35% | 6.20% |
6. Definitions
6.1 Background
The Scotland Act 2012 gave the Scottish Parliament the power to set a Scottish rate of Income Tax (SRIT). SRIT applied to non-saving non-dividend (NSND) income. It allowed the Scottish Government (SG) to change the amount of Income Tax that Scottish taxpayers pay and, as a result, the amount that the SG had to spend in Scotland.
SRIT replaced 10 percentage points of each of the main UK rates of tax for the tax year commencing 6 April 2016. In that year the UK Basic, Higher and Additional rates for NSND income were reduced by 10 pence in the pound for Scottish taxpayers. This reduction was replaced by a Scottish rate set at 10 percentage points, so the overall rates paid by Scottish taxpayers remained the same as elsewhere in the UK.
The Scotland Act 2016 extended these powers, enabling the Scottish Parliament to set the tax band thresholds (excluding the Personal Allowance) as well as the rates. This applies to all NSND income of Scottish taxpayers and took effect from 6 April 2017.
6.2 Who is a Scottish taxpayer?
The definition of a Scottish taxpayer is based on where an individual resides in the course of a tax year. Scottish taxpayer status applies for a whole tax year – it is not possible to be a Scottish taxpayer for part of a tax year.
For most taxpayers, the location where they live will be obvious, but there will be less straightforward cases – for example, where people have more than one home, or have moved into or out of Scotland during the year. HMRC has provided guidance to help in these circumstances.
The location of a person’s employer is not relevant. So, for example, someone who works in Scotland, but has their home elsewhere in the UK, will not be a Scottish taxpayer.
Detailed guidance to whom Scottish Income Tax will apply
6.3 How do the tax systems on NSND income compare for Scottish and rUK taxpayers?
In 2018 to 2019 SIT was changed to introduce 2 new tax bands, the Starter rate (19%) and the Intermediate rate (21%) either side of the Basic rate (20%). The Higher and Top rates of tax were also increased by 1% for Scottish taxpayers increasing from 40% and 45% to 41% and 46% respectively.
The Higher rate threshold for rUK increased to £50,000 in 2019 to 2020 but remained unchanged at £43,430 for Scotland.
Table 8: Scottish and rUK Income Tax Thresholds, 2018 to 2019 and 2019 to 2020
| Tax Band Threshold | Scotland 2018 to 2019 | rUK 2018 to 2019 | Scotland 2019 to 2020 | rUK 2019 to 2020 |
|---|---|---|---|---|
| Personal Allowance | £11,850 | £11,850 | £12,500 | £12,500 |
| Basic Rate Threshold | £13,850 | N/A | £ 14,549 | N/A |
| Intermediate Rate Threshold | £24,000 | N/A | £24,944 | N/A |
| Higher Rate Threshold | £43,430 | £46,350 | £43,430 | £50,000 |
| Additional/Top Rate Threshold | £150,000 | £150,000 | £150,000 | £150,000 |
Table 9: Tax rates for Scottish and rUK Income Tax, 2018 to 2019 and 2019 to 2020
| Tax Rates | Scotland 2018 to 2019 | rUK 2018 to 2019 | Scotland 2019 to 2020 | rUK 2019 to 2020 |
|---|---|---|---|---|
| Starter Rate | 19% | N/A | 19% | N/A |
| Basic Rate | 20% | 20% | 20% | 20% |
| Intermediate Rate | 21% | N/A | 21% | N/A |
| Higher Rate | 41% | 40% | 41% | 40% |
| Additional/Top Rate | 46% | 45% | 46% | 45% |
6.4 Why are we producing these statistics?
The SIT outturn in HMRC’s Annual Report determines the SG’s Income Tax revenues while the equivalent outturn for Income Tax on NSND income for rUK taxpayers in these statistics is used by HMT to determine the deduction to the SG’s Block Grant. The final adjustments to the SG’s Block Grant will only be confirmed once the figures in this publication have been formally signed off by the NAO through their annual audit of the HMRC Trust Statement.
These statistics are being published to give more information about NSND Income Tax paid by Scottish taxpayers.
6.5 What is the relationship between these statistics and other personal tax statistics and information?
There are other publications which show similar statistics to what is shown in this publication. It is important to understand how these other statistics relate to what is being released here and highlight differences in coverage or data used to compile each set of statistics.
The following publications are explained below:
- Devolved tax and spending forecasts (OBR)
- Scotland’s Economic and Fiscal forecasts (SFC)
- Personal Income Statistics from the Survey of Personal Incomes
- Earnings and Employment Statistics from PAYE Real Time Information
- Income Tax Receipts Publication
OBR: Devolved tax and spending forecasts
The OBR was established in 2010 to provide independent and authoritative analysis of the UK’s public finances. Alongside the UK Government’s Budgets and other fiscal statements, they produce forecasts for the economy and the public finances. They publish these in their Economic and Fiscal Outlook (EFO).
Since 2014, the OBR have also forecasted the tax streams that are devolved to the Scottish Parliament. The OBR publish devolved tax and spending forecasts alongside each EFO that are consistent with their main UK forecasts. The Treasury draws on the OBR’s tax forecasts when making spending settlements for the Scottish Government in accordance with their fiscal framework.
In the EFO, the OBR forecast based on the national accounts, with SA recorded in the year in which it is received. This contrasts to the OBR Devolved tax and spending publication and in the statistics set out here, where SA is recorded on a liabilities basis (i.e. in the year in which the tax liability arose.
The latest OBR devolved forecasts of SIT were published in March 2021. This shows the OBR forecast of SIT for 2019 to 2020 to be £11.8bn and the rUK NSND equivalent to be £163.1bn.
OBR March 2021 Devolved Tax and Spending Forecast
SFC: Scotland’s Economic and Fiscal forecasts
The SFC was established in 2017 and is Scotland’s official and independent budget forecaster. As such, it is the SFC’s forecasts, rather than the OBR’s forecast, for SIT that determines the amount the Scottish Government can draw down from the Treasury. The SFC reports to the Scottish Parliament.
The SFC produces 5-year forecasts of SG tax revenues, social security expenditure and of the Scottish economy. The SFC publication ‘Scotland’s Economic and Fiscal Forecasts’ details their forecasts of devolved taxes including devolved Income Tax. This publication also provides an explanation of how the SFC and OBR forecasts, as well as the outturn presented in this SIT publication, are used to adjust Scotland’s Budget.
The latest SFC Economic and Fiscal Forecasts publication was released in January 2021. This shows the SFC forecast of SIT to be £11,838 million for 2019 to 2020.
SFC Economic and Fiscal forecasts
SPI: Personal Income Statistics
HMRC release an annual publication from the Survey of Personal Incomes (SPI) which shows statistics for taxpayers’ personal incomes. This publication provides breakdowns to highlight the number of individuals with different sources of income and subject to certain reliefs.
In April 2021 HMRC published the annual Personal Income statistics for 2018 to 2019 which are based on the SPI. The data used in the SPI publication is different to the data used in this publication.
The SPI is a sample of around 750,000 individuals in either SA or PAYE. The SPI is designed to measure total income and the total tax impact on the Exchequer and therefore includes the tax impact of RAS payments to pension providers and Gift Aid payments to charities. It also measures liability and takes no account of some tax not being collected.
There is a further HMRC publication, ‘Income Tax Statistics and Distributions’, which provides projections for future tax years based on the SPI. The projections in that publication reflect announced changes to the Income Tax system and use determinants from the OBR to model tax liabilities in future years. The latest publication of this series was released in June 2021 and provides projections for tax years 2018 to 2019 to 2021 to 2022.
Income Tax Statistics and Distributions
The statistics presented in these two publications are not expected to be consistent with what is shown in this publication. This is due to sampling variation, the measurement differences described above and the fact that projections are a forecast of how tax liabilities may evolve for future years.
RTI: Earnings and Employment Statistics
Since April 2020 HMRC and the Office for National Statistics (ONS) have jointly released monthly statistics on earnings and employment statistics using data from PAYE RTI. The aim of this publication is to provide users with information on the number of individuals receiving pay from PAYE, their mean and median pay as paid through PAYE and the total amount of pay from PAYE in each country or region of the UK.
UK Real Time Information Experimental Statistics
The statistics in the RTI earnings and employment publication are different to the RTI statistics shown in Table 4 of this statistical release, although both are compiled from the same source of data.
The RTI publication presents information relating to employees only and excludes data on payments made to occupational pensioners while this publication includes tax collected from occupational pensions as well as employments
In addition, the RTI publication only presents statistics for number of employees and their pay. This release shows tax collected via PAYE, which may include collection of tax due on other income collected via the PAYE tax code. This can arise from savings or dividend income and other charges such as the HICBC.
Income Tax Receipts Publication
HMRC publish an annual National Statistics publication on Income Tax Receipts. The statistics presented in this publication show tax liabilities for specific tax years.
Income Tax Receipts Statistics
Liabilities are amounts of tax due on incomes arising in a given tax year, whereas receipts show amounts paid and collected in a given year. Due to lags in the Income Tax payment regimes, particularly for SA, liabilities and receipts for the same year can differ significantly.
Liabilities and receipts will also differ for other reasons, for example when over or underpayments occur which are repaid or recovered in a later year altering total receipts in that year in a way unrelated to tax liabilities for that year.
7. Outturn data methodology
The methodology set out in this section reflects the methodology for calculating the outturn which has been agreed between the SG and HMRC.
The final outturn figures reflect accrued revenue and have been calculated using actual liabilities data together with some estimation where actual data is unavailable. Details of this for each of the 6 components of the outturn figure is explained below.
Total NSND outturn =
- +SA Established liability
- +PAYE established liability
- +Estimated further liability
- -Adjustment for uncollectable amounts
- -Relief at Source (RAS) pension relief
- -Gift Aid
7.1 SA Established Liability
Income Tax liability is established for all individuals in SA once their SA return has been received and their tax calculation has been conducted.
This includes any individual who is required to file a SA return who also has an employment or occupational pension for which tax is deducted at source through PAYE.
The established liability for those who submit an SA return is calculated for each taxpayer identified in SA by summing the Income Tax due at each tax rate on NSND income and then reducing it by a share of reliefs.
Reliefs
Income Tax reliefs reduce the total amount of Income Tax an individual is liable to pay.
Some reliefs, such as relief for qualifying distributions and refinance relief for landlords, can only be claimed when an individual has a specific source of income. In calculating the SA established liability, such reliefs are prioritised to the appropriate stream of income before any excess is apportioned to other streams of income.
All other reliefs, such as marriage allowance, married couples’ allowance and relief for gift aid payments, can be claimed irrespective of what income sources an individual has. These ‘generic’ reliefs are applied proportionately to tax due on savings/dividend income and tax due on NSND income based on the level of gross Income Tax liability.
Other SA charges and CRCs
There are other charges which can be raised against an individual in SA through investigations/assessments or via a ‘Create Return Charge’ when an individual has failed to submit their return.
These additional charges, if known when data is being compiled, are also included when determining the SA established Income Tax liability.
Scottish share
The total SA established Scottish liability is then calculated by summing the NSND liability, net of reliefs, across each Scottish taxpayer in SA.
Scottish taxpayers are defined by having a Scottish tax calculation in the SA system or being included in the Scottish NPS extract explained below.
The rUK established SA liability is calculated in a similar way but summing across all rUK taxpayers where rUK taxpayers are all taxpayers not included in the Scottish (or Welsh for the ‘Post-Welsh devolution’ basis) NPS extracts.
7.2 PAYE Established Liability
PAYE established liability includes:
- liabilities for individuals who are reconciled in PAYE
- PAYE settlement agreements
Individuals reconciled in PAYE (Scottish taxpayers)
For individuals who are in PAYE but have not been issued with a notice to file in SA, their Income Tax liability is established when their PAYE account is reconciled.
A bespoke data extract of all Scottish individuals in NPS for each tax year was commissioned specifically to assist in compiling the outturn figures.
This provided the liability for NSND income, net of reliefs, for all Scottish taxpayers by tax rate.
Individuals reconciled in PAYE (rUK taxpayers)
For past outturns, there was no equivalent data extract for rUK taxpayers. Therefore, the rUK NSND PAYE established liability was compiled in a different way to the methodology for Scottish taxpayers.
The rUK PAYE established figure was estimated by making use of data from RTI and scaling RTI receipts for rUK taxpayers based on the relationship between the PAYE established liability and RTI receipts for Scottish taxpayers.
The method assumes that for non-SA individuals in PAYE the propensity for Scottish taxpayers to over or under pay tax is the same as for rUK taxpayers.
This rate of over/under paying is applied to the RTI receipts data of rUK non-SA taxpayers to estimate the level of rUK PAYE established liability.
However, as mentioned in section 2.1, with the introduction of WRIT in the 2019 to 2020 tax year, a bespoke NPS extract was required to calculate rUK PAYE Established Liabities on the ‘post-Welsh devolution basis’. English and Northern Irish NSND Income Tax has been compiled using this extract in the same way Scottish liabilities are compiled. This change in methodology results in two different measures for UK-wide PAYE Established Liabilities.
PAYE settlement agreements
The established PAYE amount includes a share of liabilities raised through PAYE Settlement Agreements (PSA).
A PSA allows an employer to make one annual payment to cover all the tax and NI due on minor, irregular or impracticable expenses or benefits for their employees.
The expenses and benefits reflected in the PSA are not recorded through payroll and are not required to be included on end of year P11D forms, in which other employment expenses and benefits are reported to HMRC.
The Scottish share is determined by using RTI data to determine the share of tax collected by employers through PAYE schemes which have a PSA. RTI data is also used to determine how the tax is distributed across tax bands for Scottish and rUK taxpayers.
7.3 Estimated further liability
In addition to the established liability the final outturn figure includes an estimate for:
- liabilities from late filed SA returns
- liabilities realised from compliance activity
- liabilities from unreconciled PAYE cases
These are included within the outturn component ‘Estimated further liability’.
Late filed SA returns
The value of late filed SA returns has been estimated for each tax year by examining historic SA data to determine the pattern of SA filing in the preceding five tax years. It is assumed that the average growth of liabilities for these years will be similar to how the liabilities will grow for the years presented in these statistics.
This is performed separately for Scottish and rUK taxpayers. Taxpayers with a Scottish postcode were used as a proxy for Scottish taxpayers in these years, as no Scottish indicator exists before SIT was introduced.
For outturn statistics relating to tax years before 2019 to 2020, this was performed at the total level only. This was then distributed based on the breakdown of established SA liabilities by tax bands.
For 2019 to 2020 this methodology was refined to account for different filing patterns across taxpayers with different marginal rates. While this does not affect the total Income Tax arising from this component of the methodology, it does provide a more accurate picture of how the Income Tax is distributed between Starter, Basic, Intermediate, Higher and Additional/Top rate taxpayers in the statistics. In particular, the improved methodology results in Additional/Top rate taxpayers being allocated a smaller share of the estimated additional liabilities because they are more likely to file on time.
Liabilities from compliance activity
Included in the estimated further liability is an amount to reflect SA Settlement Agreements not recorded through SA, which are raised as part of compliance investigations. The Scottish and rUK NSND share (as well as the split between tax bands) of this is assumed to be the same proportion as observed in the SA established liability.
Liabilities from unreconciled PAYE cases
Almost all PAYE cases are normally reconciled within 12 months of the end of the tax year. However, complex tax affairs or operational changes means that HMRC occasionally delays some customers’ end of year reconciliations to prevent them receiving an incorrect tax calculation or accounting update. As the cause of these delays may vary each year, appropriate methodologies for estimating the value of these unreconciled PAYE cases are identified via consultation with business experts each year. For 2019 to 2020, the value has been estimated by identifying the unreconciled cases and using tax receipt data from RTI.
7.4 Adjustment for uncollectable amounts
Uncollected SA amounts
This amount has been estimated based on the same sample of HMRC taxpayer data over the previous five tax years used to establish the late filed SA returns for the ‘Estimated further liability’ component.
The adjustment for uncollected amounts for each tax year is then estimated by applying the average from these historic collection rates to the known established and unestablished SA liability figures. This is completed separately for Scottish and rUK taxpayers to calculate specific uncollected amounts for each.
This is performed at a total level and a tax band level. The estimated value of uncollected amounts at each tax band is then scaled to the total estimated uncollected amount.
Uncollected PAYE amounts
Not all tax due is collected by HMRC and some is subsequently remitted or written off when it cannot be recovered.
This component reflects the amount written off from PAYE employers when they have failed to pay all the Income Tax they were expected to.
The uncollected amount is estimated by analysing data for the last four years, then a forecast is created based on the pattern demonstrated from this data. This gives an estimate of how much PAYE Income Tax (at a UK level) is expected to be remitted or written off in the future for each tax year. The forecast was slightly adjusted this year to account for the impact COVID19 may have on the profile of write-offs related to the 2019 to 2020 tax year.
The Scottish share of this uncollected amount is determined by analysing PAYE schemes who are known to have had an amount remitted or written off for that specific year.
RTI data is then analysed for each of these PAYE schemes to calculate what proportion of total tax collected by these schemes is in respect of Scottish taxpayers. RTI data is also used to determine how the tax is distributed across tax bands for Scottish and rUK taxpayers.
7.5 Relief At Source (RAS) pension relief
When an individual pays into a pension scheme, the scheme treats this as being received net of Basic rate tax and reclaims that Basic rate tax relief back from HMRC to add to the member’s pension pot.
This adjustment in the outturn calculation reflects the Basic rate tax being passed to the pension provider and no longer held as Income Tax by the exchequer.
The RAS for pension contributions in this calculation is determined by using information from annual returns made by pension schemes which show the amount of gross contributions made by scheme members in the appropriate tax year.
The proportion relating to Scottish taxpayers is calculated by identifying individual contributions made by scheme members who have a Scottish postcode held on the pension contribution data.
7.6 Gift Aid
When a taxpayer makes a charitable donation, the charity can claim Basic rate tax relief from HMRC on the value of the donation.
This adjustment in the outturn calculation reflects the Basic rate tax being passed to the charity and no longer held as Income Tax by the exchequer.
Charities can back date claims for this Basic rate tax by up to four years. Therefore, the value which will ultimately relate to a specific tax year has been estimated using previous years data.
The Scottish share has been estimated as an average of Scotland’s share of the UK population and Scotland’s share of total UK Income as measured by the SPI. Scottish cases were identified based on postcode as the Scottish indicator did not exist before SIT was introduced.
7.7 HMRC RTI for PAYE methodology
The estimates in Table 4 have been sourced from data held on HMRC’s PAYE RTI administrative system. The RTI administrative system covers all individuals who have a live employment open on a PAYE Scheme.
Most people pay Income Tax through PAYE. This is the system that employers or pension providers use to take Income Tax and National Insurance contributions before they pay an employee’s wages or pension. An employee’s tax code tells the employer how much Income Tax to deduct.
Under RTI, employers are required to send HMRC information about tax and other deductions made through the PAYE system every time an employee is paid. Since April 2014, all employers have been required to report in real time with around 2.3 million PAYE schemes covering a total of 45 million employees and pensioners reporting through RTI. This provides HMRC with a very rich source of data, which can be used to better inform public understanding of the labour market.
Individuals who pay tax through the SA system are included in these statistics if they are also employed and paid via PAYE. Individuals with more complex financial affairs (for example the self-employed or those who have a high income) may also pay or be refunded Income Tax and NI through SA. Individuals in SA who are not in the PAYE system will not be included in these statistics.
Production of in-year monitoring of Scottish tax receipts, provided in Table 4 of this publication, has the following caveats:
- the sum of these figures will not equate to the final outturn and are only intended to be an indication of part of the outturn (from employments covered by PAYE)
- RTI data does not include all income reported through Self Assessment such as profits from self-employment or income from property and thus only provides a partial picture of NSND Income Tax liabilities in Scotland.
- Income Tax due on other sources of income such as savings interest may be collected through PAYE using a process known as coding out. This process is also used to collect amounts due for some non-Income Tax charges, such as the HICBC. Coded out tax amounts are included in RTI data and therefore appear in these figures
- RTI data in-year is subject to amendments throughout the year, and any end-of-year updates that may occur are not included
- these figures are pre-reconciliation and provisional
- the NPS flag is taken as a snapshot in time and this means that as taxpayers change residential address during the year, their status and therefore the figures may change