The winds of change are blowing through this spring, although they are nowhere near as strong as those that saw two new income tax bands introduced last year.
That’s when the starter and intermediate rates were brought in as Derek Mackay exercised his right to alter Scotland’s income tax rates and bands, aside from the personal allowance.
While the Finance Secretary resisted the temptation to follow up on those sweeping changes with more of the same, taxpayers can expect a few changes to bite in 2019/20.
Income tax in Scotland
When Westminster announced its plan to raise the higher-rate threshold from £46,350 to £50,000 with effect from 6 April 2019, Mackay had a tough choice to make.
He could have followed Chancellor Philip Hammond’s lead to pass on a break to higher-rate taxpayers in Scotland or ensure they pay more income tax than their counterparts down south.
Mackay opted for the latter, freezing all existing income tax rates and bands with the exception of the personal allowance, which rises to £12,500 in line with the rest of the UK.
Income tax rates and bands in Scotland (2019/20)
|Bands||Taxable income 2019/20||Rate|
|Personal allowance||Up to £12,500||0%|
|Starter rate||Over £12,500 to £14,549||19%|
|Basic rate||Over £14,549 to £24,944||20%|
|Intermediate rate||Over £24,944 to £44,430||21%|
|Higher rate||Over £44,430 to £150,000*||41%|
|Top rate||Above £150,000*||46%|
The impact on higher-rate taxpayers
Someone earning £50,000 a year or more south of the border or in Northern Ireland will pay HMRC £7,500 in income tax in 2019/20.
By comparison, higher-rate taxpayers earning more than £50,000 a year in Scotland will be paying £9,044 in income tax.
It is crystal clear that those of you who fall into that bracket will be £128 a month, or £1,544 a year, worse off than our counterparts in the rest of the UK.
Land and buildings transaction tax
When the Greens rubber-stamped Mackay’s 2019/20 Budget at the very last minute, on first look they appeared to back a tax break for landlords of non-residential properties.
That arrived with the announcement that the lower rate of land and buildings transaction tax (LBTT) for non-residential properties will reduce from 3% in 2018/19 to 1% in 2019/20.
As ever, the devil was in the detail, as non-residential landlords were dealt a double blow with the top LBTT rate rising to 5% and the fact it kicks in from £250,000, instead of the 2018/19 threshold of £350,000.
These changes come in after the additional dwelling supplement for residential landlords already increased from 3% to 4% on 25 January 2019.
Business rates for Scotland’s SMEs
With high-street retailers struggling around the UK, a welcome boost was provided by the decision to cap an increase in business rates at 2.1%.
This should result in all small and medium-sized businesses in Scotland paying less to HMRC than firms of similar size elsewhere in the UK.
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With the new tax year upon us, our experts are perfectly positioned to assist with all your personal tax or business needs throughout 2019/20.