New Scottish Tax Rates

Moves to freeze Scottish income tax rates are adding risk and volatility to the Scottish tax regime and could lead to behavioural changes among the wealthy, the Chartered Institute of Taxation (CIOT) has warned.

MSPs last week  voted to approve the Scottish government’s income tax rates for the 2019/20 tax year by 61 votes to 52.

They put a freeze on the higher rate of income tax at 41 per cent for workers earning between £43,430 and £150,000 a year.  In the rest of the UK the higher tax rate threshold will rise to £50,000 from April.

The top rate of tax was also frozen at 46 per cent for those earning above £150,000,

What this means is that the gap between Scottish income tax and that in the rest of the UK continues to widen.

For those earning between £24,944 and £43,430 an income tax rate of 21 per cent will apply while earnings between £14,549 and £24,944 will incur a 20 per cent charge, and a starter rate of 19 per cent was passed for income between £12,500 and £14,549.

Scotland’s five-band tax system means lower earners pay less in tax than those in the rest of the UK but higher earners pay more.

The Chairman of the CIOT’s Scottish technical committee, said: “Some Scottish taxpayers may find they pay less income tax in the coming year.

“This can be attributed in part to the Scottish government’s policy to increase the starter and basic rate bands of income tax, which protect lower paid employees by reducing their tax burden relative to the rest of the UK”.