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Scottish Draft Budget 2018-19

Scottish Draft Budget 2018-19

Derek Mackay has introduced a Scottish Draft Budget with significant changes to Scotland’s income tax rates.


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On 14 December 2017 Scotland’s Finance Secretary Derek Mackay introduced the proposed Scottish Draft Budget for 2018/19, which included wide-ranging changes to income tax rates and bands for Scottish taxpayers. In a move that surprised many commentators, a new 19 percent Starter Band and 21 percent Intermediate Band of income tax was announced, alongside the more widely trailed 1 percent increases in the Higher and Additional Rates. This represents a radical development for the UK tax system generally, and for Scottish taxpayers in particular. Whilst it should be remembered that the Scottish Government is a minority administration and will need support from opposition parties in order to pass its Budget, we expect that the proposed tax reforms will be enacted in a similar form to those set out today, especially given the other parties’ published positions on income tax.

A Land and Buildings Transaction Tax (LBTT) relief for first time buyers will be introduced which raises the nil rate threshold to £175,000 (from £145,000). Those buying a property for over £175,000 will also benefit from the relief on that portion of the purchase price below £175,000. This should provide an LBTT saving of up to £600 for first time buyers.

Scottish Landfill Tax (SLfT) continues to shadow its UK equivalent and the credit for contributions made to the Scottish Landfill Communities Fund remains capped at 5.6 percent of an operator’s total SLfT liability.

No announcements were made regarding the deferred introduction of Air Departure Tax (ADT), which was originally planned to replace Air Passenger Duty (APD) from 1 April 2018. In addition, the timing of the devolution of Aggregates Levy remains unclear.

For more on the announcements in the Scottish Draft Budget, please see our dedicated webpage. We have also prepared an On a Page, which sets out a high level overview of the key measures.

For further information please contact:

Alan Turner

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