ICAS publishes final Scottish income tax rates and bands
Today the Scottish Parliament confirmed there will be five tax bands for Scottish taxpayers in 2018/19.
Commenting on the Scottish rate resolution Charlotte Barbour, Director of Taxation at ICAS, said: “While the measures provide a marginally more progressive tax take, they will also introduce some operational issues around tax relief at source mechanisms such as with pension relief.”
Five tax bands
From 6 April 2018, Scottish taxpayers will pay tax by reference to five income bands as opposed to three in the rest of the UK. The new rates and bands for 2018/19 are set out in the following table:
Band Name | Band Width £ | Band Rate |
Starter Rate | 11,850-13,850 | 19% |
Basic Rate | 13,851 – 24,000 | 20% |
Intermediate Rate | 24,001 – 43,430 | 21% |
Higher Rate | 43,431 – 150,000 | 41% |
Top Rate | £150,001 + | 46% |
The north-south divide
Instead of £44,273, as Scottish Finance Secretary Derek Mackay had proposed in the draft Scottish Budget for 2018/19, the Scottish higher rate threshold for 2018/19 will be set at £43,430. This compares with a threshold of £46,350 south of the border.
To take an example, in 2017/18 a Scottish taxpayer with earnings of (say) £47,000 is paying £400 more income tax than a UK taxpayer outside Scotland. Following the Scottish Budget in December, this differential was expected to increase to £625 in 2018/19. However, as a consequence of today’s rate resolution, it is now £794.
How do the income tax bands stack up?
Earnings | Scottish Tax Liability in 2018/19 | Difference in Scotland between 2017/18 and 2018/19 | Difference with rest of UK for 2018/19 |
£15,000 | £610 | £90 more in your pocket in 2018 | Scots £20 better off |
£24,000 | £2,410 | £90 more in your pocket in 2018 | Scots £20 better off |
£26,000 | £2,830 | £70 more in your pocket in 2018 – due to UK personal allowance increase | Scots no better or worse off |
£30,000 | £3,670 | £30 more in your pocket in 2018 | Scots £40 worse off |
£33,000 | £4,300 | No difference | Scots £70 worse off |
£60,000 | £13,284 | £184 less in your pocket in 2018 | Scots £924 worse off |
£90,000 | £25,584 | £484 less in your pocket in 2018 | Scots £1,224 worse off |