The draft Scottish Budget for 2017/18 was announced on 16 December 2016 by finance secretary John Swinney. This draft budget will operate for the first time under the Fiscal Framework established in support of the Scotland Act 2016. This is a material change in the financial responsibility of the Scottish Parliament as it marks the first opportunity to set their own income tax rates and thresholds with the exception of the personal allowance, which is set by the UK government.
Below are what we believe are the main points to arise from the draft legislation. However, we would always advise to contact us directly to consider how any of these tax implications may affect you based on your own circumstances.
The Scottish Government has stated that ‘it is committed to protecting the low-income tax payers and, as such, is proposing to freeze the basic rate of income tax at 20%. The Scottish government is also proposing to freeze higher and additional rates at 40% and 45% respectively.’
However, the higher income rate tax threshold will increase by inflation to £43,430 in 2017/18, which will be lower than the current UK higher rate threshold for 2017/18 set at £45,000.
The Scottish income tax rate bands are summarised below:-
Below £11,500 – 0%
Scottish Basic rate band – £11,500* – £43,430 – 20%
Scottish Higher rate band – £43,430 – £150,000 (UK £45,000 per year 2017/18)
Scottish Additional rate band – over £150,000 and above**
*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
The Scottish government have also confirmed that the higher rate of income tax threshold will increase by a maximum of inflation in all future years of this parliament.
The Scottish government will also be able to set the rates and bands for all Scottish non-savings non-dividend (NSND) income tax from 2017/18.
Land and Buildings Transaction Tax
The Scottish equivalent of stamp duty land tax, land and buildings transaction tax (LBTT), rates have been frozen at current 2016/17 levels. However, there will be an additional supplement of 3% of the purchase price of the property, on top of the existing LBTT, in relation to second homes and buy-to-let properties.
It was also confirmed that the council tax freeze would continue for the ninth consecutive year.
If you would like to view the draft legislation please follow the link below:-