Finance Secretary Derek Mackay delivered the 2018/19 Scottish Draft Budget on Thursday 14 December 2017. In it he sets out the Scottish government’s financial and tax plans.
The Scottish government has the power to set the rates and bands of income tax for Scottish resident taxpayers. This is other than those for savings and dividend income.
Scottish Income Tax
Since 6 April 2016 the rates and bands of Scottish income tax have been frozen at 20%. The Scottish higher and Scottish additional rates likewise at 40% and 45% respectively. For 2017/18 the higher rate threshold in Scotland is £43,000. 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%.
In the Scottish Draft Budget 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
How it Compares
The UK higher rate tax point for 2018/19 has been set at £46,350. This is for those entitled to the full UK personal allowance. 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.
More about the Scottish Draft Budget: GOV.SCOT publication