Scottish Income Tax Rates and Bands 2017-18

16 December 2016

The Scottish Government has published their draft finance Budget which confirms that the higher rate of income tax threshold is proposed to increase by inflation to £43,430 in 2017-18.

The Scottish Draft Budget proposes to freeze the basic rate of income tax at 20 per cent and also to freeze the higher and additional rates at 40 per cent and 45 per cent respectively.

The Scottish Government has also confirmed in their budget that the higher rate of income tax threshold will increase by a maximum of inflation in all future years of this Parliament.

Draft Budget

This is the first Draft Budget in which the spending plans are underpinned by revenue-raising powers devolved by the Scotland Act 2016 in addition to taxes already fully devolved.

Since 2015-16 a proportion of Scottish spending has been funded by revenues from Land and Buildings Transaction Tax and the Scottish Landfill Tax. In 2016-17, the Scottish Parliament was able to set the Scottish Rate of Income Tax, a power provided by the Scotland Act 2012. From 2017-18, the Scottish Parliament will be able to set the rates and bands for all Scottish non-savings non-dividend (NSND) income tax. The devolution of Air Passenger Duty and the Aggregates Levy will follow in future years.

In parallel with the devolution of new powers, a Fiscal Framework was negotiated and agreed between the UK and Scottish Governments which sets out the financial arrangements which underpin and support the new powers. The Fiscal Framework also determines how the Scottish Government's block grant will be adjusted in light of its new fiscal powers.