On 12 December 2018 Finance Secretary Derek Mackay delivered the 2019/20 Scottish Draft Budget setting out the Scottish government's tax and financial plans.
Key announcements included new bands for Scottish income tax and changes to Land and Buildings Transaction Tax.
Scottish income tax
The Scottish government has devolved powers to set the rates and bands of income tax (other than those for savings and dividend income) which apply to Scottish resident taxpayers.
The Scottish Budget announced the following income tax rates and bands for 2019/20 which will be subject to Parliamentary approval:
| 2018/19 |
2019/20 |
Name of Band |
Rate |
| Over £11,850* - £13,850 |
Over £12,500* - £14,549 |
Starter Rate |
19% |
| Over £13,850 - £24,000 |
Over £14,549 - £24,944 |
Scottish Basic Rate |
20% |
| Over £24,000 - £43,430 |
Over £24,944 - £43,430 |
Intermediate Rate |
21% |
| Over £43,430 - £150,000** |
Over £43,430 - £150,000** |
Higher Rate |
41% |
|
Over £150,000**
|
Over £150,000** |
Top Rate |
46% |
* assuming the individual is entitled to a full UK personal allowance
** the personal allowance will be reduced if an individual's adjusted net income is above £100,000. The allowance is reduced by £1 for every £2 of income over £100,000
The personal allowance is currently £11,850 for 2018/19. The personal allowance for 2019/20 will be £12,500.
Land and Buildings Transaction Tax (LBTT) changes
Currently higher rates of LBTT are charged on purchases of additional residential properties, such as buy-to-let properties and second homes. Although these are the main targets of the higher rates, some other purchasers may have to pay the higher rates.
The Additional Dwelling Supplement (ADS) potentially applies if, at the end of the day of the purchase transaction, the individual owns two or more residential properties.
The Scottish government announced an increase in the ADS from 3% to 4%. If approved by the Scottish Parliament, the rate change will come into force from 25 January 2019, but will not apply if the contract for a transaction was entered into prior to 12 December 2018. Existing arrangements allowing for the supplement to be reclaimed will continue.
Changes for non-residential rates and bands
The Scottish government will reduce the lower rate of non-residential LBTT from 3% to 1%, increase the upper rate from 4.5% to 5% and reduce the starting threshold of the upper rate from £350,000 to £250,000. Again, these changes are expected to come into force from 25 January 2019, but will not apply if the contract for a transaction was entered into prior to 12 December 2018.
The proposed rates and band for non-residential LBTT transactions are as follows:
Non-residential transactions
| Purchase price |
Rate |
| Up to £150,000 |
0% |
| £150,001 - £250,000 |
1% |
| Over £250,000 |
5% |
Non-residential leases
| Net present value of rent payable |
Rate |
| Up to £150,000 |
0% |
| Over £150,000 |
1% |
For further details on how the Scottish Budget could affect you, please contact us.