SD1 applies Scotland's higher rate of 42% to all income from this source — significantly higher than the equivalent English D0 code at 40%.
Forty-two per cent. Every pound you earn from this income source is taxed at Scotland's higher rate when HMRC assigns the SD1 code. No Personal Allowance, no basic rate band, no intermediate rate. Just a flat 42% deducted at source. That is 2 percentage points higher than the equivalent English D0 code (40%), which means cross-border awareness matters if you are comparing take-home pay or considering a move.
SD1 combines two elements. The S prefix marks you as a Scottish taxpayer, confirming that your main residence is in Scotland and your income tax follows Scottish rates set by the Scottish Parliament. The D1 tells your employer to apply a flat rate with no Personal Allowance.
In Scotland's D-series coding:
This differs from the rest of the UK, where D0 = higher rate (40%) and D1 = additional rate (45%). The numbering shift exists because Scotland has an extra rate band (the intermediate rate at 21%) that the rest of the UK does not have.
When HMRC assigns SD1, it means your entire Personal Allowance, starter rate band, basic rate band, and intermediate rate band have all been allocated to your main income source. The income from this second source falls entirely within Scotland's higher rate band of 42%. Every pound is taxed at that rate before it reaches your bank account.
Scotland's higher rate of 42% is 2% more than the equivalent English rate of 40%. On a second income of £10,000, that 2% difference means an extra £200 per year in tax compared to an English higher rate taxpayer in the same position. The gap widens proportionally with higher second incomes.
This comparison matters for anyone who works cross-border, is considering a move, or simply wants to understand why their Scottish payslip shows more tax than a colleague in England.
| Feature | SD1 (Scotland) | D0 (England, Wales, NI) |
|---|---|---|
| Tax rate | 42% | 40% |
| Personal Allowance | None | None |
| Higher rate band | £43,663 to £75,000 | £50,271 to £125,140 |
| Extra cost on £10k | £4,200 | £4,000 |
| Extra cost on £20k | £8,400 | £8,000 |
| Difference | £200 more per £10,000 of income | -- |
Two key differences beyond the rate:
First, Scotland's higher rate band starts at £43,663, compared to £50,271 in the rest of the UK. Scottish taxpayers enter the higher rate band almost £7,000 sooner.
Second, Scotland's higher rate band is narrower. It ends at £75,000, where the advanced rate of 45% begins. In the rest of the UK, the 40% rate continues all the way to £125,140. This means a Scottish taxpayer earning between £75,001 and £125,140 pays 45% (advanced rate), while an English taxpayer on the same income pays only 40% (still in the higher rate band).
If SD1 were applied to your only income source instead of S1257L, the overpayment would be severe. Here is the comparison:
| Annual income from source | Tax on SD1 (42% flat) | Tax on S1257L (Scottish bands) | Annual difference |
|---|---|---|---|
| £10,000 | £4,200 | £0 | £4,200 overpaid |
| £30,000 | £12,600 | £3,538 | £9,062 overpaid |
| £50,000 | £21,000 | £9,029 | £11,971 overpaid |
At a flat 42%, the numbers escalate quickly. On a £50,000 salary, an incorrect SD1 code costs nearly £12,000 per year in overpaid tax. That is almost £1,000 per month being taken from your pay that should remain with you.
These figures illustrate why SD1 should never appear on a sole income source. It is designed exclusively for secondary income that falls within the higher rate band.
SD1 is assigned to secondary income sources for Scottish higher rate taxpayers. The scenarios are specific.
Second job for a higher-rate Scottish taxpayer. Your main job pays £55,000 on an S1257L code. You take consultancy work paying £12,000 on the side. Since your main income already uses the Personal Allowance and all lower rate bands, every pound from the consultancy falls in the higher rate band. HMRC assigns SD1.
Second pension in Scotland. If you have multiple pension sources and your total pension income exceeds £43,662 (plus the £12,570 Personal Allowance), HMRC may assign SD1 to the pension source where income falls in the higher rate band.
Company directors with multiple Scottish appointments. Directors drawing salaries from two Scottish companies may see SD1 on the second directorship if total income pushes that salary into the higher rate band.
Cross-border workers who live in Scotland. If you live in Edinburgh but work for a London-based company, you are a Scottish taxpayer. Your second income source carries Scottish codes, not English ones. You would have SD1, not D0, because Scottish rates apply based on where you live, not where your employer is based.
Craig lives in Aberdeen and earns £58,000 from his main engineering job. He also earns £15,000 from part-time oil and gas consultancy. His main job carries S1257L, and the consultancy carries SD1.
Main job (S1257L):
| Component | Amount |
|---|---|
| Gross salary | £58,000 |
| Personal Allowance | £12,570 (tax-free) |
| Starter rate (19%) | £2,827 x 19% = £537.13 |
| Basic rate (20%) | £12,093 x 20% = £2,418.60 |
| Intermediate rate (21%) | £16,171 x 21% = £3,395.91 |
| Higher rate (42%) | £14,339 x 42% = £6,022.38 |
| Total tax on main | £12,374.02 |
Consultancy (SD1):
| Component | Amount |
|---|---|
| Gross consultancy income | £15,000 |
| Personal Allowance | £0 |
| Tax at 42% (all of it) | £15,000 x 42% = £6,300 |
Combined position:
| Item | Amount |
|---|---|
| Total gross income | £73,000 |
| Total income tax | £18,674.02 |
| Monthly take-home (tax only) | £4,527 approx |
Craig's SD1 code is correct. His main job has exhausted all bands up to the higher rate, and his total income (£73,000) remains within the higher rate band ceiling of £75,000. If his total income exceeded £75,000, HMRC might change the consultancy code to SD2 (45% advanced rate) for the portion above that threshold.
SD1 is correct if:
SD1 is probably wrong if:
If SD1 is incorrect, every pay period costs you significantly. At 42%, even small amounts of over-taxation add up fast.
Step 1: Update your HMRC Personal Tax Account. Log in at gov.uk/personal-tax-account, go to "Check your Income Tax," and review the income estimates HMRC holds for each of your employers. If they are overestimating your main income, the second source code may be wrong. Correcting the income figure triggers a recalculation.
Step 2: Phone HMRC. Call the Income Tax helpline on 0300 200 3300 (Monday to Friday, 8am to 6pm). Have your National Insurance number, both employers' PAYE references, and your actual income figures ready. Ask HMRC to review your code allocation.
Step 3: Provide your P45 if applicable. If you started a new job and did not submit your P45, hand it to your employer immediately. This gives HMRC the information needed to issue the correct code.
Step 4: Check for cumulative correction. Once the code is corrected, your employer recalculates your tax from 6 April on a cumulative basis. If you have been on SD1 incorrectly for several months, the refund through your wages can be substantial. At 42% on income that should have been taxed at 20% or 21%, the difference accumulates rapidly.
For previous tax years, HMRC issues a P800 or you can contact them directly to request a review. You can reclaim overpaid tax for up to four previous tax years.
Related tax codes: Scottish tax codes overview | SD0 tax code | SD2 tax code | D0 tax code
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