Income tax in Scotland

Income tax in Scotland is a tax of personal income gained through employment. This is a tax controlled by the Scottish Parliament, and collected by the UK government agency HM Revenue & Customs. As proposed in the Scottish 2018-19 budget, the Scottish income tax system will become significantly different from the rest of the United Kingdom.[1]

Taxation in Scotland
Scottish Government agencies
National Taxation
Local Taxation

History

When the devolved Scottish Parliament was set up in 1999, the Scottish Parliament had the power to vary the rate of income tax by 3% (in either direction) from the rates applied in the rest of the UK. This power was specifically authorised by the second question of the 1997 devolution referendum. In any event, no Scottish Government ever chose to use the variable rate, and left tax rates the same as they were in the rest of the UK.

Following the passage of the Scotland Act 2012, the Scottish Parliament was given greater powers over income tax. In the 2016/17 tax year it had to set a Scottish Rate of Income Tax (SRIT).[2] The idea of the power was that the UK tax rate would be reduced by 10%, with the block grant being reduced by an equivalent amount.[2] In 2016/17 the Scottish budget set the SRIT at 10%, which left tax rates at the same level as in the rest of the UK.[2]

The Scotland Act 2016 gave the Scottish Parliament full control over income tax rates and bands, except the personal allowance.[3] In 2017/18, the only notable difference between Scotland and the rest of the UK was that the higher rate limit was frozen in Scotland. In the draft budget for 2018/19, new rates and bands have been proposed.[1]

Tax rates and bands

2017-18

This tax year was the first in which the Scotland Act 2016 was in force, with the first ever differentiated Scottish income tax. The only difference from the rates for the rest of the UK was the threshold for the higher rate (£43,000 as opposed to £45,000).

2017-18[4]
Rate Income Tax Rate Gross Income
Basic rate 20% £11,500† - £43,000
Higher rate 40% £43,001 - £150,000††
Additional rate 45% Above £150,000††

2018-21

Two new bands were introduced in 2018.

2018-21[5]
Rate Income Tax Rate Gross Income
2018-2019 2019-2020 2020-2021
Starter rate 19% £11,850† - £13,850 £12,500† - £14,549 £12,500† - £14,585
Basic rate 20% £13,851 - £24,000 £14,550 - £24,944 £14,586 - £25,158
Intermediate rate 21% £24,001 - £43,430 £24,945 - £43,430 £25,159 - £43,430
Higher rate 41% £43,431 - £150,000††
Top rate 46% Above £150,000††

†Assumes individuals are in receipt of the Standard UK Personal Allowance.

††Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

References
  1. "Scottish income tax changes unveiled". BBC News. BBC. 14 December 2017. Retrieved 15 December 2017.
  2. ceu@scotland.gsi.gov.uk, Scottish Government, St. Andrew's House, Regent Road, Edinburgh EH1 3DG Tel:0131 556 8400 (8 September 2015). "Scottish Rate of Income Tax". www.gov.scot.
  3. ceu@scotland.gsi.gov.uk, Scottish Government, St. Andrew's House, Regent Road, Edinburgh EH1 3DG Tel:0131 556 8400 (13 December 2016). "Scottish Income tax 2017/18". www.gov.scot.
  4. "Income tax rates set". Scottish Government News.
  5. "Income Tax rates and allowances for current and past years". gov.uk.
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