How much tax will I pay: Scottish Draft Budget for 2018/19 summary

Scottish Budget News: How much tax will I pay and all your other questions answered

How much tax will I pay and all your other questions answered in our Scottish Draft Budget for 2018/19 summary.
 
Scottish Finance Secretary Derek Mackay unveiled his second Scottish Budget on Thursday 14 th December including some significant changes to the Scottish Rate of Income Tax (SRIT) and Land and Buildings Transaction Tax (LBTT).
 
The changes announced are subject to Scottish Parliamentary debate over the coming weeks and may change before they become final in the New Year, so please watch this space. How the changes interact with Marriage Allowance, gift aid, pensions, Universal Credit and Tax Credits might also have been published by then.
 

Changes to Scottish Income Tax Bands and Rates

Scottish Income Tax applies to the employment, pension, property and self-employment income of Scottish resident taxpayers. Mr Mackay has set forward proposals for two new bands and two adjusted bands to apply from 6th April 2018 as follows:

  • 19p New starter rate from £11,850* to £13,850

  • 20p Basic rate from £13,851 to £24,000

  • 21p New intermediate tax rate from £24,001 to £44,273

  • 41p Higher rate from £44,274 to £150,000

  • 46p Additional rate from £150,000

*Assuming that the full UK personal allowance is available to you

 

 

How much tax will I pay: Changes to Land and Buildings Transaction Tax (LBTT)

The Scottish Government will introduce a new LBTT relief for first-time buyers of properties up to £175,000. The relief raises the zero tax threshold for first-time buyers from £145,000 to £175,000, so 80 per cent of first-time buyers in Scotland will pay no LBTT at all. Those first-time buyers buying a property above £175,000 will also benefit from the relief on the portion of the price below the threshold, which means all first-time buyers will benefit from the relief by up to £600.
 
Non-Domestic Rates (NDR) - Non-Domestic Rates, or Business Rates, are a property tax collected by councils to fund the local services received by the property. The Cabinet Secretary for Finance and the Constitution responded to the Barclay Review of Non-Domestic Rates in September 2017, and confirmed the new policies to be introduced in 2018-19 include:
 
  • a Business Growth Accelerator, which will ensure that any rates bill rises due to improvements to or the expansion of existing properties will not take effect until 12 months after those changes are made to the property;
  • a new relief for day nurseries to support the increased provision of increased childcare;
  • an expansion of Fresh Start Relief to include all property types, not limited to only listed property types as recommended by Barclay; halving the period the property has to be empty to qualify from 12 months to six; and doubling the level of relief from 50 per cent to 100 per cent for the first year of new occupation; and
  • a move to three-yearly revaluations from 2022 with valuations based on market conditions on a date one year prior; and
  • use the September 2017 rate for CPI (3 per cent) rather than for RPI (3.9 per cent), to calculate the annual inflationary uplift in the Business Rates poundage for 2018-19;
  • the continuation of a transitional cap for Aberdeen City and Shire offices and all but the very largest hospitality properties. This means that 2018-19 bills will rise by no more than 12.5 per cent in real terms (15.88 per cent in cash terms) for eligible properties;
  • the introduction of a new 60 per cent relief for hydro generation properties; and
  • delaying the entry of new build properties onto the valuation roll, ensuring that no rates are paid until they are occupied. Thereafter the tenant will qualify for the Growth Accelerator for 12 months.
  • a Business Growth Accelerator, which will ensure that any rates bill rises due to improvements to or the expansion of existing properties will not take effect until 12 months after those changes are made to the property;
  • a new relief for day nurseries to support the increased provision of increased childcare;
  • an expansion of Fresh Start Relief to include all property types, not limited to only listed property types as recommended by Barclay; halving the period the property has to be empty to qualify from 12 months to six; and doubling the level of relief from 50 per cent to 100 per cent for the first year of new occupation; and
  • a move to three-yearly revaluations from 2022 with valuations based on market conditions on a date one year prior; and
  • use the September 2017 rate for CPI (3 per cent) rather than for RPI (3.9 per cent), to calculate the annual inflationary uplift in the Business Rates poundage for 2018-19;
  • the continuation of a transitional cap for Aberdeen City and Shire offices and all but the very largest hospitality properties. This means that 2018-19 bills will rise by no more than 12.5 per cent in real terms (15.88 per cent in cash terms) for eligible properties;
  • the introduction of a new 60 per cent relief for hydro generation properties; and
  • delaying the entry of new build properties onto the valuation roll, ensuring that no rates are paid until they are occupied. Thereafter the tenant will qualify for the Growth Accelerator for 12 months.

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