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Do you pay less income tax if you live in Scotland?

The short answer is, it depends how much you earn whether or not you pay less income tax if you live in Scotland.

According to the proposed new budget, it will actually be more expensive to live in Scotland if you earn more than £24,001. Higher earners in Scotland will pay more income tax than those earning the same amount in other parts of Britain. But 55% of Scottish taxpayers in the lower brackets will pay less income tax.

The Scottish Finance secretary, Derek Mackay, has put forward his Budget for Scotland which includes the income tax structure. With their devolved powers, the Scottish Parliament are able to set their own income tax rates and brackets. They have not yet passed the proposed Budget which will apply from April 2019.

Is the Personal Allowance the same amount in Scotland?

The Personal Allowance amount of £12,500 in 2019-20 is across the whole of the UK.

What changes have been made to the income tax bands?

This table shows a list of Scotland’s income tax bands and their rates for 2019-20 tax year.

 

Your income Tax bracket and rate
£0 – £12,500 Personal Allowance 0%
£12,001 – £14,549 Starter Rate 19%

 

£14,549 – £24,944 Basic Rate 20%

 

£24,944 – £44,430 Intermediate Rate 21%
£44,430 – £150,000 Higher Rate 41%

 

£150,000+ Top Rate 46%

 

 

The rise in the income tax thresholds is in line with inflation.

The main difference in Scotland’s budget is that they do not plan to raise the threshold for Higher Rate taxpayers, as will be the case for taxpayers in England and Northern Ireland.

In line with the rest of the UK, once a Scottish taxpayer earns £100,000, every £2 more than this leads to a £1 deduction from their Personal Allowance. This means that people earning £125,000 pay income tax on their total earnings.

Do the different income tax systems make a difference to how people live?

Well, the way the Scottish government chooses to spend public money can make a huge difference to how people live. For example, in Scotland there are lower council tax rates, free university tuition and free personal care for older citizens.

Part of this Scottish Budget includes figures for future targeted spending from Mr Mackay:

  • £500m more into the NHS
  • Pay for public sector workers earning below £36,500 up by 3% above inflation
  • Public sector workers earning over £36,500 up by 2% (ceiling at £80,000)
  • 90% Scottish businesses able to access business rates relief
  • Early years and nurseries funding up by £500m

This spending is possible partly because the Treasury has raised Scotland’s grant to £950m and the takings from Scottish taxpayers’ income tax.

As part of his Budget introduction, Mr Mackay said:  “Those priorities will continue to be front and centre of our tax policy in the year ahead. Freezing the higher-rate tax threshold will ensure Scotland’s health and care services get the full budget increase they deserve.”

Interestingly, the Guardian reported: “The Fraser of Allander Institute, an economics thinktank at Strathclyde University, estimated that Scotland’s income tax regime raised about £550m more than the equivalent rates in the rest of the UK.”

The Budget is yet to be passed by the Scottish Government and will have to address several concerns. Such as the conservative’s argument that it makes Scotland a less desirable place to work for those earning over a certain income. It can make it confusing and some employers have already had to make adjustments to ensure equality across their UK staff. More complications also increase the chances of people over paying income tax. If you do, there is a process to claim an income tax rebate.

December 14th, 2018|Tax News|

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