Will Buying a House in Scotland Affect My Tax Residency?

Q. I’m a resident in England but I’m buying a house in Scotland and will be splitting my time between the two – both in terms of work (where we have a new office opening in Glasgow) and for family time. What are the tax implications, and will I become classified as a Scottish taxpayer?

A: For both Wales and Scotland, there are devolved powers regarding income tax, and this can be a tricky area. In your case, it’s not clear exactly how you will divide your time and it sounds like you are not totally sure yourself yet – and things may change during the following tax year, too. However, there are a number of tests to apply here that will help you to understand if you will be counted as a Scottish taxpayer.

HMRC points out that a key test to apply is whether you have a ‘close connection’ to Scotland. That would mean either you have a single place of residence – and that is located in Scotland.

If, as in your case, someone has more than one place of residence, the ‘main place’ would be in Scotland “for at least as much of the tax year as it has been in each other part of the UK.”

If the tests above can’t determine the answer, then something called ‘day counting’ applies. It seems that you won’t yet know how many days you’re going to be in Scotland compared to those in England. However, to illustrate this as clearly as we can, let’s look at an example used by ICAS, a global professional membership organisation and business network for Chartered Accountants. They point out that if Mr Smith spends 120 days in Scotland, and 90 days travelling in England, 55 days in Northern Ireland and 100 days travelling in Wales, he is still a Scottish taxpayer, even though he has spent more time outside of Scotland than in it.

The important thing for you to note is that you may need to keep a close, accurate record of where you spend your time day-to-day.

The last thing to mention is that if you are classified as a Scottish taxpayer, that status applies for a whole tax year; you can’t be a Scottish taxpayer for part of a tax year.

 

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