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Scottish Budget 2018 income tax changes

Finance Secretary Derek Mackay delivered the 2019/20 Scottish Draft Budget on Wednesday 12 December 2018 setting out the Scottish government's financial and tax plans. The announcement had been timed to take place after Chancellor of the Exchequer Philip Hammond delivered the UK Budget on 29 October 2018. The Finance Secretary announced changes to Scottish income tax. Contact us for advice on how the Scottish Budget impacts you.

Scottish Income tax

The government has devolved powers to set the rates and bands of income tax (other than those for savings and dividend income) which apply to Scottish resident taxpayers. The Scottish Budget announced the following income tax rates and bands for 2019/20. These will be considered by the Scottish Parliament, and an agreed Scottish Rate Resolution will set the final Scottish Income tax rates and bands for 2019/20.

The current rates and bands for 2018/19 and the proposed rates and bands for 2019/20 on non-savings and non-dividend income are as follows:

2018/19 2019/20 Band Name Rate
Over £11,850* - £13,850 Over £12,500* - £14,549 Starter 19%
Over £13,850 - £24,000 Over £14,549 - £24,944 Scottish Basic 20%
Over £24,000 - £43,430 Over £24,944 - £43,430 Intermediate 21%
Over £43,430 - £150,000** Over £43,430 - £150,000** Higher 41%

Over £150,000**

Over £150,000** Top 46%

* 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 personal allowance is currently £11,850 for 2018/19. The personal allowance for 2019/20 will be £12,500.

The UK higher rate tax point for 2019/20 is set at £50,000 (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. The additional rate of 45% is payable on income over £150,000.

For 2019/20 Scottish taxpayers with employment income of approximately £27,000 will pay the same amount of income tax as those with similar income in the rest of the UK. For higher earners, with pay of £150,000, a Scottish taxpayer will pay approximately an extra £2,670 of income tax than those on similar income in the rest of the UK.

Internet link: GOV.SCOT budget

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