Finance Secretary Derek Mackay delivered the 2018/19 Scottish Draft Budget on Thursday 14 December 2017 setting out the Scottish government’s financial and tax plans.
The Scottish government has the power to set the rates and bands of income tax (other than those for savings and dividend income) which apply to Scottish resident taxpayers.
Since 6 April 2016 the rates and bands of Scottish income tax have been frozen at 20% and the Scottish higher and Scottish additional rates at 40% and 45% respectively. For 2017/18 the higher rate threshold in Scotland is £43,000 whilst the threshold in the rest of the UK is £45,000. This means that a Scottish higher rate taxpayer will pay £400 more tax in 2017/18 than a UK higher rate taxpayer, being £2,000 at the marginal rate of 20%.
For 2018/19 the rates and tax bands applicable to Scottish taxpayers on non-savings and non dividend income will be as follows:
|Scottish Bands||Band name||Scottish Rates|
|Over £11,850* – £13,850||Starter||19%|
|Over £13,850 – £24,000||Basic||20%|
|Over £24,000 – £44,273||Intermediate||21%|
|Over £44,273 – £150,000**||Higher||41%|
* assuming the individual is entitled to a full UK personal allowance
** the personal allowance will be reduced if an individual’s adjusted net income is above £100,000. The allowance is reduced by £1 for every £2 of income over £100,000
The UK higher rate tax point for 2018/19 has been set at £46,350 (for those entitled to the full UK personal allowance) and the tax rates for non-savings and non-dividend income have been maintained at 20%, 40% and 45% respectively.
For 2018/19 Scottish taxpayers with employment income of £26,000 will pay the same amount of income tax as those with the similar income in the rest of the UK. For higher earners, with pay of £150,000, a Scottish taxpayer will pay an extra £1,770 of income tax than those on similar income in the rest of the UK.