Rental income tax in Scotland

Rental profit is taxed at Scottish rates if you are a Scottish taxpayer

If you are a Scottish taxpayer, your rental profit is added to your salary, pension and other income and taxed at the rates and bands set by the Scottish Government. The personal allowance and the way you work out your profit are the same as anywhere else in the UK.

Who is a Scottish taxpayer

You are a Scottish taxpayer if you live in Scotland, which means your main home is there. Where your rented property is does not decide it. That gives two cross-border cases:

• If you live in Scotland and let a flat in England, you pay Scottish rates on the profit.
• If you live in England and let a flat in Scotland, you pay the rates for England on the profit.

If you are employed or get a pension, a tax code starting with S shows that HMRC treats you as a Scottish taxpayer.

If you have more than one home

Your main home is usually where you live and spend most of your time, whether or not you own it. It can be a home where you spend less time if that is where most of your possessions are, where your family lives, or where you are registered for things such as your bank account, GP or car insurance. If you are still unsure, compare the days you spend in Scotland with the days elsewhere in the UK, counting where you are at midnight. If more days are in Scotland, you are a Scottish taxpayer for the whole tax year.

If you move to or from Scotland

If you move during a tax year, you pay Scottish Income Tax for that year if you lived in Scotland for longer than anywhere else in the UK. The Scottish rates then apply from the start of that tax year. Tell HMRC when your address changes, or you may pay tax at the wrong rates.

Scottish income tax bands for 2026/27

Scotland has six income tax bands. The table shows each band on taxable income, and on total income for someone with the standard personal allowance of £12,570.

Bands for 2025/26

Use these bands for your 2025/26 tax return. The rates were the same, but the starter and basic rate bands stopped at lower incomes, so more income fell into the intermediate band. The higher, advanced and top rate bands started at the same points.

How the bands apply to your rental profit

Your other income fills the bands first and your rental profit sits on top of it. The band your salary or pension has already reached sets the rate on the first pound of profit, and any profit that crosses into the next band is taxed at that band's rate. Because the Scottish higher rate starts at a lower income than the higher rate elsewhere in the UK, a landlord with a middle-range salary can pay noticeably more on the same profit in Scotland.

Worked example: the same letting in Scotland and in England

Two landlords each earn £45,000 from a job in 2026/27. Each receives £18,000 rent, spends £3,200 on letting fees, repairs and insurance, and pays £6,400 of mortgage interest. One lives in Scotland and the other lives in England.

Rent received

£18,000

Less allowable expenses

£3,200

Property profit

£14,800

Section 24 credit, both landlords

£1,280

Tax caused by the rent, landlord in England

£3,586

Tax caused by the rent, landlord in Scotland

£4,936

Extra tax paid in Scotland

£1,350

The Scottish landlord's salary already reaches the Scottish higher rate band, so all £14,800 of profit is taxed at 42%. In England, £5,270 of the profit falls in the basic rate band at 20% and £9,530 in the higher rate band at 40%. Both landlords get the same credit, because it is set at the UK rate.

Mortgage interest relief is at the UK rate, not a Scottish rate

The Section 24 credit is 20% of your mortgage interest and other finance costs for every individual landlord in the UK, including Scottish taxpayers. Mortgage interest is not deducted from your rent. Your tax bill is reduced by the credit instead, limited by your property profit and your income. The full rules are in the guide to Section 24 mortgage interest relief.

At the higher, advanced and top rates

If your profit is taxed at 42%, 45% or 48%, the money you spend on interest is taxed as profit at that rate but relieved at only 20%. The gap is wider than for a higher rate landlord in England, where the higher rate is 40%.

At the starter rate

At the starter rate the credit can be worth more than the tax on that slice of profit, because the credit rate of 20% is higher than the starter rate of 19%.

Take a Scottish taxpayer who earns £14,000 from a job, receives £3,000 rent with no other costs, and pays £3,000 of mortgage interest. The rent only covers the interest, but the profit for tax is £3,000, because interest is not deducted. Of that profit, £2,537 is taxed at the starter rate of 19% and £463 at the basic rate of 20%.

Income tax on the salary alone

£271.70

Income tax on salary and profit, before the credit

£846.33

Less the Section 24 credit

£600

Total income tax

£246.33

Tax caused by the rental income

-£25.37

The tax caused by the rent is a negative figure. The credit of £600 wipes out all the tax on the rental profit, and the part left over lowers the tax on the salary slightly, so this landlord's total bill is a little lower than it would be with no letting at all. The credit can never reduce your bill below nothing or create a refund on its own.

What changes in 2027/28

From 6 April 2027, property income in England, Wales and Northern Ireland is taxed at its own separate rates, but Scottish taxpayers' property income stays at the Scottish rates. The law leaves room for separate Scottish property income rates, but none have been introduced. Scottish rates and bands for 2027/28 have not been set yet, because they are set in the Scottish Budget.

The Section 24 credit changes for everyone. From 2027/28 it is set at the UK property basic rate of 22%, and the legislation contains no Scottish version of it. If Scottish rates stayed as they are, the credit would be higher than the starter, basic and intermediate rates, and still well below the higher, advanced and top rates.

The wider changes are covered in the guide to the new property income tax rates.

What stays the same as the rest of the UK

Only the rates and bands on earnings, pensions, rental profit and similar income are Scottish. The rest of the system works the same way across the UK.

• Savings interest and dividends are taxed at the same rates as in the rest of the UK.
• The personal allowance of £12,570, the property allowance of £1,000 and the Rent a Room limit of £7,500 are UK-wide.
• Making Tax Digital for Income Tax uses the same thresholds for qualifying income from self-employment and property: over £50,000 from 6 April 2026, over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028.

What Making Tax Digital asks of you is explained in Making Tax Digital for landlords.