Scotland Brings In New Income Tax Bands
Higher earners in Scotland will be paying more income tax in 2018/19 than anywhere else in the UK.
Finance secretary Derek Mackay decided to introduce 2 new Scottish income tax bands in his Draft Budget 2018/19, which was delivered on 14 December 2017.
A new starter rate of income tax will see those earning less £13,850 a year paying 1 percentage point less than in 2017/18, at 19p in the pound.
However, earnings between £24,000 and £44,273 will fall into a new intermediary rate of income tax which is 21%.
Mackay opted to freeze the basic rate of income tax at its 2017/18 rate of 20%, although higher rate taxpayers face a 1p in the pound tax rise – from 40% to 41%.
The following Scottish rates of income tax will take effect from 6 April 2018:
Scottish bands | 2018/19 | 18/19 tax | 2017/18 | 17/18 tax |
Personal allowance | Up to £11,850 | 0% | Up to £11,500 | 0% |
Starter rate | £11,851* to £13,850 | 19% | ||
Basic rate | £13,851 to £24,000 | 20% | £11,501 to £43,000 | 20% |
Intermediary rate | £24,001 to £44,273 | 21% | ||
Higher rate | £44,274 to £150,000** | 41% | £43,001 to £150,000 | 40% |
Top rate | Above £150,000** | 46% | Above £150,000 | 45% |
*Assumes individuals are in receipt of the personal allowance.
**Those earning more than £100,000 will see their personal allowance reduced by £1 for every £2 earned over £100,000.
A new relief is also to be introduced for first-time buyers in Scotland, who will be able to buy a property for up to £175,000 without being liable for land and buildings transaction tax (LBTT).
Mackay claims 80% of first-time buyers will pay no LBTT as a result of introducing the relief, which will come into effect on 6 April 2018 (subject to a consultation).
In other noteworthy measures introduced by the finance secretary, the 1% cap on public sector salaries in Scotland will be lifted for 2018/19.
The pay policy includes a 3% rise for those earning less than £30,000 a year, and caps the pay bill at 2% for individuals earning over £30,000 a year.
Annual pay rises will be limited to £1,600 for public sector workers earning in excess of £80,000 a year.
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