Revised income tax bands in Scotland

Category: Taxation - Posted On: Feb 27 2018


As if tax wasn’t taxing enough, how will the Scottish public be certain if they have paid the correct amount of tax on their wages or pension now that we will have 7 different rates of tax on earnings? Add in National Insurance and the number increases to 9.

Previously, proposals (as published in our winter 2018 Taxation News) had the 41% tax band, starting at £44,273. As a result of the changes to the band, an individual earning £44,273 will now pay an additional £168.60 income tax.

The Scottish Parliament has now confirmed the tax rate and thresholds that will apply from 6 April 2018 and it is a long way from the simplification of the tax system that we crave. The following table illustrates:

Income in band
£
Scottish tax rates
%
Class 1 NIC rates
%
Total rate on band
%
0 - 8,424000
8,425 - 11,85001212
11,851 - 13,850191231
13,851 - 24,000201232
24,001 - 43,430211233
43,431 - 46,350411253
46,351 – 100,00041243
100,001 – 123,70061.5*263.5
123,701 to 150,00041243
Over 150,00046248

And we haven’t mentioned the tax rates and thresholds which apply to dividend and savings income yet! Those will follow the existing UK rates and thresholds. For interest income the rate may be 0%, 20%, 40% or 45%, for dividend income it might be 0%, 7.5%, 32.5% or 38.1%. That takes the total number of rates up to 15!

HMRC operate the concept of ‘Self Assessment’. A tax return can be completed on paper or more commonly now online using HMRC’s own software or you can appoint an agent to do this for you. Agents will use their own tax return preparation software. However, in 2016/17 HMRC software developers did not glorify their position as they were unable to program an accurate calculation of the tax liability in all cases. How are they going to manage incorporating the Scottish rates too?

There will be many other issues for Scottish taxpayers to consider too; when can I claim the marriage allowance, will I get tax relief on charitable donations at 40% or 41%, if my pension provider claims tax relief at 20% can I claim relief for the additional 1% if I pay tax at 21%? The answer to the last question is yes and it may result in many Scottish intermediate rate taxpayers completing a tax return for the first time.

But don’t despair, speak to a tax expert at EQ who will not only ensure you pay the right amount of tax, and no more than legally due, they will also make sure that HMRC have got it right too.

For more information or advice, get in touch with one of our EQ tax specialists today via taxation@eqaccountants.co.uk or call your local office contact.