The UK Budget set out an increase in the personal allowance, which rises from £11,500 in 2017/18 to £11,850 in 2018/19. The basic rate band is £33,500 in 2017/18 and £34,500 in 2018/19. So the threshold at which the 40% band applies increases from £45,000 to £46,350 for those who are entitled to the full personal allowance.
For taxpayers treated as resident in Scotland, it’s a different story. In 2017/18, (other than for savings and dividend income, where the £33,500 basic rate band applies), the basic rate income tax band for Scottish residents is £31,500. This means that Scottish taxpayers will generally pay higher rate tax if their income (other than savings and dividend income) exceeds £43,000, or if total income exceeds £45,000.
The Scottish Budget 2018/19 proposals include new tax rates and also new bands, making a total of five tax bands in all. For 2018/19, the rates and tax bands applicable to Scottish taxpayers on income other than savings and dividend income are expected to be as follows:
| Scottish Bands |
Band name |
Scottish Rate |
| Over £11,850 - £13,850 |
Starter |
19% |
| Over £13,850 - £24,000 |
Basic |
20% |
| Over £24,000 - £43,430 |
Intermediate |
19% |
| Over £43,430 - £150,000 |
Higher |
41% |
| Over £150,000 |
Top |
46% |
The figures above assume 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.
There is also change in sight for Welsh taxpayers, with Welsh rates of income tax in prospect from 6 April 2019.
Employers may need to nudge employees - Scots or Welsh - to be sure that HMRC are kept up to date with address details. Changes can be notified, and current details kept by HMRC checked, online via the Personal Tax Account. An individual can sign into their account, or set one up at https://goo.gl/LkVoL2
There is a special S tax code for Scottish taxpayers, which should be issued by HMRC: employers should not make decisions on residence status. If you have questions on this area, or any other aspect of employer payroll procedure, please contact us for advice.