Scottish draft budget sets ‘distinct income tax policy’ for Scotland

14 December 2017

The Scottish draft budget proposals introduce a new 19p Starter Rate of tax, freeze the basic rate at 20p, introduce a new Intermediate Rate of 21p and an increase to both the Higher Rate and Top Rate by 1p respectively.

Under the current devolved settlement, income tax is the only major tax power that the Scottish Government has at its disposal. So to support public services and the economy, and to maintain the benefits of the social contract, this budget has set a ‘distinct income tax policy’ for Scotland, which if approved by parliament will see changes from April 2018-19.

 

According to the Budget, this policy will protect low and middle income earners by introducing a new 19p Starter Rate of tax and freezing the Basic Rate. And compared to 2017-18, 70% of income tax payers in Scotland will pay less tax in Scotland next year.

 

Philip Sim, a BBC Scotland political journalist, published an interesting table on twitter (reproduced below) which shows examples of earnings and what the income tax difference would be compared to 2017-18 and to the rest of the UK (rUK) to 2017-18 .

Income

Comparison to 2017-18

Comparison to rUK

£15,000

£90

£20

£20,000

£90

£20

£26,000

£70

£0

£33,000

£0

-£70

£35,000

-£20

-£90

£40,000

-£70

-£140

£50,000

£85

-£655

£60,000

-£15

-£755

£75,000

-£165

-£905

£100,000

-£415

-£1,155

£120,000

-£715

-£1,455

£150,000

-£1,174

-£1,774

 

Those earning under £33,000 will pay less income tax in 2018-19 than in 2017-18, with higher earners paying proportionately more.

55% of taxpayers – those earning up to £26,000 – will pay marginally less income tax than if they lived elsewhere in the UK. For the majority, Scotland will be the lowest taxed part of the UK.

 

CIPP comment

Employers across the UK with employees who are Scottish tax payers have little more than 4 months to ensure their payroll software can implement these changes. HR departments will also need to be ready to receive possible grievances from those employees who do the same job as a colleague, but because of their residency status, may pay more in income tax from April 2018.

Our latest CIPP poll asks if your existing payroll software will be able to accommodate these changes from April 2018.  Please take a moment to answer the poll which is situated to the right of this, and every CIPP news item.

Feedback is also welcome to the policy team. Please email us with your thoughts and views.