Income Tax, National Insurance and PAYE in Scotland

As business in Scotland, you’re responsible for deducting Income Tax and National Insurance contributions from employees. Find out what you need to do.


As a business in Scotland, there are regulations you must follow when paying your employees. You also need to complete certain tasks each month as part of your payroll.

Income Tax, National Insurance and PAYE

As an employer, you have to deduct income tax and National Insurance Contributions (NIC) from each employee’s pay. You pay these deductions to HM Revenue & Customs (HMRC). National Insurance is a type of social security that funds benefits such as state pensions.

You deduct tax from your employee’s salary through a system known as Pay As You Earn (PAYE). Employees pay between 0-45% tax, depending on their earnings. HMRC provides each employee with a tax code to make sure they pay the right amount of tax.

Employers’ National Insurance

You pay a 13.8% Employers’ National Insurance contribution for each of your employees earning over £112 per week. This is a tax-deductible expense for your business.

Register as an employer

You need to register as an employer with HMRC – they will provide you with an employer reference and a PAYE guide. You may also want to consult an accountant about the most tax-efficient payment system for your employees, and how to calculate deductions.