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.
For any help or advice with financial planning talk to RPD