Scottish Budget For 2018/19

Derek Mackay has delivered his Budget speech this afternoon, setting out the Scottish Government spending and taxation plans for the year ahead.

The Cabinet Secretary for Finance has limited powers, but has taken steps to amend income tax rates, and adjust Land and Buildings Transaction Tax for first time buyers, in what he describes as an attempt to reduce wealth inequality within the country.

New bands and rates of Income Tax were announced for those living in Scotland as follows:-

Please note that these rates do no apply to income from savings and dividends.

This can be contrasted with the tax rates for other parts of the United Kingdom which are as follows:-

Scotland will now have five tax rates, compared to just three in the remainder of the UK, bringing additional complexity into the tax system.

People earning less than £26,000 per year will be better off with the new tax rates, but everybody paying the Scottish rates of tax that has income above that level will suffer a higher tax charge. The Budget documentation shows that the changes in tax rates will lead to Scotland collecting an additional £164million of Income Tax than if the changes to tax rates and bands were not made.

The second area where the Scottish Parliament have power to set tax rates is for Land and Buildings Transaction Tax.

The only change that have been suggested for this tax is to introduce a new LBTT relief for first time buyers of residential properties valued at up to £175,000. The normal nil rate band is £145,000, so this £30,000 increase will provide a maximum saving of £600 for first time buyers.

Please get in touch with our tax team on 01228 530913 or 01768 864466 if you have any queries about how the Budget announcements will affect you.

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