Scottish income tax rates and thresholds confirmed for 2019/20 – what do they mean for Scottish taxpayers?
The Scottish parliament has confirmed the rates and thresholds for income tax that will apply to the non-savings and non-dividend income of Scottish taxpayers from 6 April 2019.
The Scottish rates and bands for income tax from 6 April 2019 are set out below:
|Scottish income tax rates 2019/2020||
Scottish income tax bands 2019/20
|Scottish starter rate – 19%||£12,501 - £14,549 (£2,049)|
|Scottish basic rate – 20%||
£14,550 - £24,944 (£10,395)
|Scottish intermediate rate – 21%||£24,945 - £43,430 (£18,486)|
|Scottish higher rate – 41%||£43,431 - £150,000|
|Scottish top rate – 46%||£150,001 and above|
These rates and bands apply only to the non-savings and non-dividend income of Scottish taxpayers. There is more information about who is a Scottish taxpayer in the tax basics section of this website, but in essence, if your home is in Scotland for more than half of a tax year, you are a Scottish taxpayer. As a result, these rates and bands will affect people who live in Scotland, if they have profits from rental property or if they have earned income, such as employment income, pension income or profits from self-employment.
Scottish taxpayers continue to pay income tax according to the UK rates and bands of income tax on their savings and dividend income.
During the first year of Scottish income tax (2017/18) there was only minor divergence from UK income tax, with a difference in the higher rate threshold. In 2018/19 however, the Scottish government introduced much more significant changes to the structure of income tax in Scotland, which continue into 2019/20.
The key differences between the Scottish and UK structures are that:
- Scottish income tax has a five-band structure (compared to three bands for UK income tax), with the basic rate band having effectively been split into three – the starter, basic and intermediate rate bands;
- the additional rate band has been renamed the top rate band;
- the higher and top rates are 41% and 46% respectively (compared to 40% and 45% for UK income tax).
As in 2017/18 and 2018/19, there continues to be a difference in the higher rate threshold from that in the rest of the UK – the point at which individuals start to pay higher rate tax. If we assume that you are eligible for the personal allowance (£12,500 in 2019/20) and have only employment income, if you are a Scottish taxpayer, your higher rate threshold will be £43,430 for 2019/20 (this is unchanged from 2018/19); whereas if you are a UK taxpayer, your higher rate threshold will be £50,000.
These points of divergence between the Scottish and UK rates and bands inevitably create some complexities for Scottish taxpayers. For example, Scottish taxpayers who have savings and dividend income as well as earned income, have to consider both the Scottish and the UK rates and bands when working out their tax liability. We explore these complexities in a blog on the Chartered Institute of Taxation website.
Due to the starter rate band, Scottish taxpayers with non-savings and non-dividend income of less than £26,993 in 2019/20 will pay less income tax than taxpayers in the rest of the UK earning the same level of income. The tax reduction is relatively small, at a maximum of around £20 for the year. Scottish taxpayers who are also claiming universal credit or means-tested benefits are likely to see a significantly smaller reduction, perhaps of only £7 for the year, because a £20 increase in their net taxable income will reduce their universal credit entitlement by 63%.
We can take the example of Nina to illustrate.
Nina has employment income of £20,000 for 2019/20.
|Total taxable income||7,500|
|Starter rate band (19%)||2,049||389.31|
|Basic rate band (20%)||5,451||1,090.20|
|Total Scottish income tax due||1,479.51|
If Nina was a UK taxpayer, rather than a Scottish taxpayer, she would pay tax on her total taxable income of £7,500 at the rate of 20%, giving a total liability of £1,500. As a Scottish taxpayer, she only has to pay £1,479.51, which is £20.49 less.
It should also be noted that, as soon as a Scottish taxpayer has non-savings non-dividend income of more than £24,944, in order to calculate their own tax liability accurately, they will have to make use of three different bands and rates, excluding the personal allowance – a UK taxpayer earning the same amount will only have to apply one rate.
We can take the example of Craig to illustrate.
Craig has employment income of £25,300 for 2019/20. He wants to check that the correct amount of tax has been taken from his pay during the year, so he decides to calculate his own tax liability.
|Total taxable income||12,800|
|Starter rate band (19%)||2,049||389.31|
|Basic rate band (20%)||10,395||2,079.00|
|Intermediate rate band (21%)||356||74.76|
|Total Scottish income tax due||2,543.07|
Points to note
Although the Scottish parliament has set rates and thresholds for income tax payable by Scottish taxpayers on certain types of income, HM Revenue & Customs (HMRC) continue to collect and administer all income tax. This means that if you have any questions about your income tax, you should continue to contact HMRC.
If you are a Scottish taxpayer and have PAYE income during 2019/20, you should have a Scottish PAYE tax code (an “S” code).
You can find out more about Scottish income tax, including how to work out if you are a Scottish taxpayer or not, in our guidance in our tax basics section.
It is important to make sure that HMRC have your correct and up-to-date address. This is not the only factor in determining Scottish taxpayer status, but it will be decisive in many cases.