SCOTTISH BUDGET – new rates, bands and pension tax relief

March 12th 2018

With more changes than you can shake a stick at, this is article includes a summary of the new Scottish Tax rates and bands which come into effect on 6 April.

The Scottish Government Budget announced new Scottish Income Tax rates and bands for the 2018 to 2019 tax year. These were confirmed on 20 February 2018 and will apply from 6 April 2018.

What’s changing?
For 2018 to 2019 the Scottish Government has announced the following rates for people who live in Scotland. These rates and allowances are different to the rates and allowances for the rest of the UK.

The 2018 to 2019 tax year

Income Tax rate     Proposed Scottish rate     Rest of UK rate
Starter rate 19%
(if you earn between £11,850 and £13,850)
Basic rate 20%
(if you earn between £13,851 and £24,000)
(if you earn between £11,851 and £46,350)
Intermediate rate 21%
(if you earn between £24,001 and £43,430)
Higher rate 41%
(if you earn between £43,431 and £150,000)
(if you earn between £46,351 and £150,000)
Top rate 46%
(if you earn over £150,000)
(if you earn over £150,000)

The tax bands shown assume that you’re in receipt of the full personal allowance, (which is reduced by £1 for every £2 of income over £100,000).

Pension tax relief
The amount of the pension tax relief you get depends on how much you contribute to your pension scheme and on the rate of Income Tax that you pay.

How you get pension tax relief
If you’re a member of a registered pension scheme, you can get tax relief on pension contributions of up to 100% of your annual earnings.

You get the tax relief automatically if your:
•    Employer takes your pension contributions out of your pay before deducting Income Tax – this is called the ‘net pay’ arrangement.
•    Pension provider claims tax relief for you at the basic rate of 20% and adds it to your pension pot – this is called ‘relief at source’
•    You get relief at source in all personal and stakeholder pensions, and some workplace pensions. If you pay tax at a rate higher than 20% you are entitled to claim your additional relief by contacting HMRC if you don’t already complete a Self Assessment return, or through your return if you do. You can do this whether you live in Scotland or elsewhere in the UK.

As ever, do get in touch with one of the team for further advice regarding your own individual situation.

JRW Chartered accountants in Edinburgh, Galashiels, Hawick, Langholm and Peebles.