15th December 2017 at 3:27pm
What this could mean for you
Here’s our helpful summary of the Scottish Government Budget tax changes, which were announced on 14 December.
If they go ahead as planned next April, the tax changes mean some people will pay more income tax next year, while others pay less.
It will depend on your own personal circumstances.
There’s a new starting tax rate of 19% for earnings between £11,850 and £13,850 and an intermediate tax rate of 21% on earnings from £24,001 to £44,273.
Earnings between £13,851 and £24,000 will still be taxed at the basic rate of 20%.
As a result of these changes there will now be a total of five tax bands with higher-rate taxes increasing by 1%, or 1p in the pound.
What about pension saving?
Pension contributions are a very tax-efficient way to save for your future, thanks to tax relief.
But these changes could make things a bit more complex for some middle earners paying the new 21% rate.
Depending on the type of pension scheme and how payments are collected, some 21% rate-payers may need to claim the extra 1% – 1p in the pound – they’ll be entitled to, via a tax return. This could be the first time they’ll have to do a tax return.
Good news for some
If you pay into your pension by salary sacrifice, it will all be dealt with through your payroll and there’s no need for you to claim.
Of course, paying more into your pension could reduce your tax bill overall and that hasn’t changed. For Scottish higher-rate taxpayers, there’s more scope to benefit.
For example, someone currently getting 40% tax relief on what they save into their pension will be able to claim back the extra 1% via their tax return when their income tax rate goes up to 41% next April.
Tax cut planned for first-time homebuyers
The Scottish building and land tax, the Scottish equivalent of stamp duty in the rest of the UK, is due to be abolished on properties up to £175,000 for first-time buyers.
It’s a move which follows on from changes made in the UK Budget in November where first-time buyers don’t pay stamp duty on properties up to £250,000.
This tax cut is still being consulted on, but if it goes ahead as planned it will come into effect from April 2018, making it easier for many to get on the property ladder.
The information here shouldn’t be regarded as financial advice. Tax and legislation may change and the information here is based on our understanding in December 2017 and tax depends on your individual circumstances. As with any investments, the value can go down as well as up and you may get back less than you paid in.