Scottish Budget Update

18/12/2017

The draft Scottish budget has been announced in Holyrood by Derek Mackay, Cabinet Secretary for Finance and the Constitution.

This is an important announcement for Scottish resident taxpayers. But it should be noted that the Scottish government only has limited power over matters affecting financial planning as most of these are reserved to Westminster.

The key announcement was the creation of two new income tax bands as outlined below. These bands only affect non-savings, non-dividend income – e.g. salaries, trading profits and pension income. The various allowances and taxation of savings and investment income are reserved matters.

Bands Band name Scottish Rates (%)
Over £11,850 – £13,850Starter19
Over £13,850 – £24,000Basic20
Over £24,000 – £44,273Intermediate21
Over £44,273 – £150,000Higher41
Above £150,000Top46

 

The suggestion is this means 55% of Scottish taxpayers will pay less tax next year than they do this year, but more than a million Scots will pay more in income tax than their UK counterparts.

Under the changes, any worker earning more than £26,000 a year will pay more in Scotland than they will in the rest of the UK, with those on more than £44,000 and £150,000 bearing the brunt of increases

One of the key questions we’re interested in is pension tax relief.

Relief at source schemes (ie personal pensions) are geared up to collect basic rate relief at source, but now Scots have three rates within what was the basic rate tax band!

Differences between the two methods are presumably not intended, so we may see tax returns for basic rate taxpayers.

At the time of writing the answer is we don’t know – the Scottish Rate Resolution will hopefully make it clear.

If you would like more information on tax planning opportunities centred on your personal circumstances, please contact us >>

By Tony Czypionka | Accountant and Tax Adviser

Tony is the Accountant and Tax Adviser at Mantle Financial Planning Read more >>

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