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The Scottish Budget was delivered by Derek Mackay, Finance Secretary for Scotland, on 14 December. Mr Mackay announced a series of changes to the Scottish income tax rates and bands.

The Scottish Budget announcements are the latest in a series of devolutionary measures being introduced across the UK. Here, we take a look at some of the most significant changes.

Key changes affecting Scottish taxpayers

Income tax

In the Scottish Budget, Finance Secretary for Scotland Derek Mackay confirmed an increase in the higher rates of income tax, together with the introduction of two new bands, as follows:

Scottish bands Band name Rate (%)
Over £11,850* – £13,850 Starter 19
Over £13,850 – £24,000 Basic 20
Over £24,000 – £44,273 Intermediate 21
Over £44,273 – £150,000** Higher 41
Above £150,000** Top 46

*Assumes eligibility for income tax personal allowance
** Where income exceeds £100,000 the personal allowance is reduced by £1 for every £2 over this amount

Land and Buildings Transaction Tax (LBTT)

The current rates for LBTT, Scotland’s equivalent of Stamp Duty Land Tax (SDLT), will remain the same. However, the government has announced that it will introduce a new relief for first-time buyers of properties up to £175,000. The relief will raise the zero tax threshold for first-time buyers from £145,000 to £175,000. The Scottish government also announced that first-time buyers buying a property above £175,000 will benefit from the relief on the portion of the price below the threshold. The government will consult on the policy before the relief is introduced in 2018/19.

Air Departure Tax (ADT)

The Scotland Act granted the Scottish government the power to replace Air Passenger Duty (APD) in Scotland, with a new ADT.

The change was set to take effect from 1 April 2018; however, following the Autumn Budget delivered by Chancellor Philip Hammond on 22 November, the introduction of ADT has been delayed in order to allow the Scottish government to resolve issues regarding the tax exemption for flights departing from airports in the Highlands and Islands of Scotland.  

Key changes affecting Welsh taxpayers

The new Land Transaction Tax (LTT)

The Welsh government has also recently exercised its devolutionary powers: in its Draft Budget, which was published in October, the Welsh government outlined the proposed rates for a new LTT which will replace SDLT in Wales from 1 April 2018.

From this time, those seeking to buy residential property worth up to £180,000 in Wales will pay no tax on the purchase. In a written statement published on 11 December, the Finance Secretary for Wales, Mark Drakeford, announced that individuals purchasing property worth between £180,000 and £250,000 will pay a proposed 3.5% in LTT, and those purchasing a home worth between £250,000 and £400,000 will pay 5%.   

The starting threshold for LTT was originally set at £150,000, however this has subsequently been increased to £180,000 in order to ‘help everyone in Wales seeking to purchase a home’.  

Devolution of Welsh income tax

From April 2019, the National Assembly for Wales will have the power to vary the rates of income tax payable by Welsh taxpayers.

From this time, each of the three UK rates of income tax are expected to be reduced by 10p. The National Assembly will determine the three Welsh rates of income tax, which will be added to the reduced UK rates, giving the overall rate of income tax that individuals in Wales will be required to pay. 

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