When Derek Mackay revealed his last Draft Budget in December 2018, not many people predicted the introduction of two new income tax bands.
Nothing as radical was announced this time around, following the finance secretary’s decision to freeze the income tax rates for 2019/20.
Mackay’s counterpart in Westminster, Chancellor Philip Hammond, chose to raise the higher-rate to £50,000 from 6 April 2019 when delivering Budget 2018.
That means higher-rate taxpayers in Scotland will be paying substantially more income tax than those on equal earnings elsewhere in the UK in 2019/20.
Like Hammond, Mackay left the door open to revisit his spending plans before the start of the next tax year in the event of a no-deal Brexit.
Unlike Hammond, Mackay also needs the backing of another political party to bring these tax changes to fruition next spring.
We take a look at what taxpayers in Scotland can expect to pay from 6 April 2019, and any other key changes due to come in to force for the next financial year.
Income tax
Mackay was obliged to increase the personal allowance from £11,850 to £12,500 for 2019/20 in line with Westminster, but he was not bound to follow suit by raising the higher-rate threshold.
Instead, the finance secretary froze the higher-rate threshold at £43,431 for 2019/20, while the starter and basic-rate thresholds are due to rise in line with inflation.
As a result, people earning £50,000 in Scotland next year will pay £1,544 more in income tax than their counterparts down south.
| Income tax bands and rates – 2019/20 | Taxable income | Tax rate |
| Personal allowance | Up to £12,500 | 0% |
| Starter rate | £12,500 to £14,549 | 19% |
| Basic rate | £14,549 to £24,944 | 20% |
| Intermediate rate | £24,944 to £43,430 | 21% |
| Higher rate | £43,430 to £150,000* | 40% |
| Top rate | Over £150,000* | 41% |
*The personal allowance reduces by £1 for every £2 earned over £100,000.
National insurance contributions
National insurance contributions drop from 12% to 2% at the higher-rate threshold in the rest of the UK.
Earnings in 2019/20 that fall between the higher-rate in Scotland (£43,431) and the higher-rate in the rest of the UK (£50,000) have a marginal rate of tax at 53%.
Land and buildings transaction tax
The amount buy-to-let landlords or those looking to purchase a holiday home will see land and buildings transaction tax rise from 3% to 4% from 6 April 2019.
Get in touch
For more detail on how these changes affect you, or for personal tax-planning advice, call us on 0141 221 257 or email us at contact@thomasbarrie.co.uk.
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