Scottish Government revises higher rate income tax threshold

5th February 2018 | News

Scotland’s Finance Minister, Derek Mackay, in his proposals for a new five-band income tax system has revised the higher rate threshold to £43,430.

The move was due to an "anomaly" in the original plans which saw those earning between £43,525 and £58,500 getting a tax cut. However, on 31st January this was resolved following negotiations between the SNP and the Greens.

The deal also meant the draft Scottish Budget 2018/19 passed its first parliamentary obstacle by 69 votes to 56, with the backing of the six Green MSPs and two Liberal Democrats, and it is now expected to clear the remaining stages.

When the draft Scottish Budget 2018/19 was presented in December 2017, Mackay had intended on setting the higher rate threshold at £44,273 but has now altered this to £43,430.

Mackay has shaken up the system by adding a 19p "starter rate" and a 21p intermediate rate, while adding 1p to the higher and additional rates to create a five-band system.

Overall, 70% of Scottish taxpayers will pay less, 55% will pay less than they would if they lived elsewhere in the UK. However, 30% will pay more than they did last year - and 45% will pay more than they would if they lived outside of Scotland. 

Proposed income tax rates and bands

Bands Band name Rate (%)
Over £11,850*-£13,850 Starter Rate 19
Over £13,850-£24,000 Basic Rate 20
Over £24,000-£43,430 Intermediate Rate 21
Over £43,430-£150,000** Higher Rate 41
Above £150,000** Top Rate 46

* Assumes person is in receipt of the Standard UK Personal Allowance
** Personal Allowance is reduced by £1 for every £2 earned over £100,000

At present, Scotland has three income tax bands - a 20p basic rate, a 40p higher rate starting at £43,001 and a 45p additional rate for earnings over £150,000.