New progressive tax system takes effect

More than two-thirds of taxpayers will pay less on their current income this year under Scotland’s new tax bands.

Changes to the Higher and Top rate tax bands, which take effect from today, also mean an additional £428 million will be available in 2018/19 to invest in vital public services and the economy.

Under the new system, low earning taxpayers are protected through the introduction of a new Starter Rate of tax.     The income tax system will also be more progressive, raising additional revenue through the introduction of a new Intermediate Rate of 21% and increases to the Higher and Top Rates, to 41% and 46%.

As a result of these changes, and the increase in the personal allowance, all taxpayers earning up to £33,000 - 70% of all taxpayers - will be protected from any increase. Those earning more than £33,000 will pay only a proportionate amount more.

A majority of taxpayers (55%) in Scotland will pay less income tax in 2018-19 than they would in the rest of the UK, while those who can afford to pay more will make a marginally higher contribution to support public services and investment in the economy.

Finance Secretary Derek Mackay said:

“The new income tax rates and bands will make the system more progressive and deliver additional revenues to invest in public services and the economy.

“This progressive approach to reforming income tax will not only protect the lowest earning taxpayers, but ensure 70% of Scottish taxpayers pay less tax this year than last year for a given income, while the majority of Scottish taxpayers will pay less than if they lived elsewhere in the UK.

“These measures, combined with our investment in the NHS, the economy, infrastructure, education and essential public services, ensure Scotland will be the fairest taxed part of the UK and provide the best deal for taxpayers.”

Background

Income tax: Fact Sheet.