The Scottish Budget - no change to income tax rates
Following the sudden resignation of Scotland’s Finance Secretary, Derek Mackay, the Scottish Budget was delivered by the Minister for Public Finance and Digital Economy, Kate Forbes.
Background to Scottish income tax
Income tax powers were partially devolved to the Scottish government by the Scotland Act 2012. The Scotland Act 2016 built on this and since 2017/18, the Scottish Parliament has had power to set income tax rates and limits applicable to non-savings and non-dividend income to those defined as Scottish taxpayers.
Scottish taxpayers pay the same tax as the rest of the UK on savings and dividends income.
From 2018/19, the Scottish Government introduced two new tax bands, meaning that Scottish taxpayers now have 5 tax bands. The rest of the UK has 3 tax bands.
Income tax remains a partially devolved tax. The responsibility for defining the income tax base, which includes the setting or changing of income tax reliefs and exemptions, including the Personal Allowance, remains with the UK Government. Income tax on savings and dividends continues to be paid to the UK Government at rates and bands set by HM Treasury.
The Scottish Budget 2020/21
The Budget makes no changes to rates and does not introduce or remove any bands.
The UK Government have previously announced that the UK‑wide Personal Allowance would be frozen at £12,500 in 2020/21. This has formed the basis of the Scottish Budget assumptions and forecasts. This is expected to be confirmed by the UK Government in its Budget on 11 March 2020.
The 2020/21 figures below represent increases to the Basic and Intermediate Rate thresholds and no changes to the rates of tax. The Higher Rate Threshold will be frozen at £43,430 and the Top Rate Threshold will be frozen at £150,000. The Scottish Government has assumed that in the UK Budget on 11 March, the UK Government will freeze the Higher Rate Threshold in the rest of the UK at £50,000
Proposed rates and bands for 2020/21
|£12,501* ‑ £14,585||Starter Rate||19%|
|£14,586 ‑ £25,158||Scottish Basic Rate||20%|
|£25,159 ‑ £43,430||Intermediate Rate||21%|
|£43,431 ‑ £150,000**||Higher Rate||41%|
|Above £150,000**||Top Rate||46%|
*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.
Find out more information on the 2019/20 figures.
Land and Buildings Transaction Tax
Land and Buildings Transaction Tax (LBTT) has replaced UK Stamp Duty Land Tax (SDLT) in Scotland. The Additional Dwelling Supplement (ADS) was introduced from 1 April 2016 and is payable, in addition to LBTT, on purchases of all relevant residential properties above £40,000.
Residential LBTT rates and bands will be maintained at their current level.
The ADS rate will also stay at 4%.
The Scottish Government will introduce a new 2% band for non‑residential leases, applying to transactions where the net present value (NPV) of rental income over the period of the lease is above £2 million.