Derek Mackay MSP, Cabinet Secretary for Finance and the Constitution delivered his Scottish draft budget for 2019-20 in the Scottish Parliament on 12 December 2018.
The key announcements that will affect individuals and businesses in Scotland included:
- As anticipated, the Scottish Government (SG) will not implement the 3% increase to the income tax higher rate threshold announced by the UK Chancellor, Philip Hammond in the Budget statement on 29 October 2018. The higher rate threshold (40%) from 6 April 2019 in the rest of the UK will be £50,000.
- The SG has decided to freeze the income tax higher rate threshold (41%) in Scotland at £43,430 and the additional higher rate (46%) at £150,000.
- No changes were announced to the rates of income tax - see table below; however, Mr Mackay did increase the threshold for the income tax starter rate band (19%) from £13,850 to £14,549 and the basic rate band (20%) from £24,000 to £24,944. (NOTE: the requirement to pay Scottish rates depends on the tax payer's residence status rather than the source of income).
- The Additional Dwelling Supplement (ADS) which mainly applies to the purchase of holiday homes, 2nd homes and buy-to-let properties is to increase from 3% to 4% on 25 January 2019.
- The lower rate of non-residential Land & Building Transactions Tax (LBTT) will be reduced from 3% to 1% and the upper rate will rise from 4.5% to 5% - the threshold of the upper rate will also be reduced from £350,000 to £250,000.
- Business rates: the non-domestic rates poundage will increase by less than inflation. The Small Business Bonus Scheme will be maintained and the out-of-town levy recommended by the Barclay Review will not be implemented.
- Local Authorities will be allowed to increase council tax levels by up to 3%.
Spending plans announced for the forthcoming tax year beginning on 6 April 2019 include:
- Initial funding of £130m to be made available for the establishment of a Scottish National Investment Bank.
- Increase in £730m for health and care services.
- Increase in real terms for education spending, including £180m to raise standards in schools.
- £5bn capital investment commitment has been earmarked for modernising Scotland's infrastructure, including a £50m fund for regenerating local high streets.
Scottish Rates of Income Tax: 2018-19 and 2019-20
As income tax is only partially devolved under the Scotland Act 2016, Scottish taxpayers will continue to pay income tax on their savings and dividend income according to the rates and bands set by the UK Parliament - see our Tax Rate Card 2018-19, whereas non-savings and non-dividend income e.g. salary, will be taxed according to the Scottish Rate of Income Tax (SRIT) rates and bands as set out below.
|Scottish Rate of Income Tax||2018-19||2019-20|
|Top Rate||46%||Over £150,000||Over £150,000|
We will keep you posted on the likely impacts of the changes and any future Scottish Government announcements released as the legislation goes through the Scottish Parliament in early 2019.
MTD for VAT information session 13 February 2019, 9am-10.30am, Martin Aitken & Co Glasgow office >find out more
- UK Autumn Budget 2018: >the key announcements made on October 29 2018
UK Tax Rates 2018-19 >download a pdf
- Tax Planning for Life 2018-19: a range of tax planning tips on managing your finances and taxes during this tax year >download a pdf
If you have any questions about the summary’s contents or how any aspects of your tax and financial planning may be affected by the proposals contained in the Scottish Budget 2019-20 announcement, please get in touch with your usual Martin Aitken & Co or Martin Aitken Financial Services Ltd contact to discuss.
This summary has been prepared very rapidly and is for general information only. All statements within this document are based on our understanding of the changes proposed within the 12 December 2018 Scottish Budget.
You are recommended to seek professional advice before taking any action on the basis of the contents of this summary. Publication date: 13 December 2018.