The Scottish National Party run a minority Government in Scotland. With a 2018/19 Draft Budget that did not satisfy all parties, there was always going to be a need for concession and coalition.
The SNP and Greens
For the second year running, the minority Government led by the Scottish National Party has agreed a deal with the six Scottish Green MSPs to see through the Scottish Draft Budget. This will, amongst other things, set the rates and thresholds for Income Tax for the 2018/19 tax year for Scottish Taxpayers.
In a written comment in the Scottish Parliament on 31 January 2018, Finance Secretary Derek Mackay MSP (above), confirmed that an ‘anomaly’ would be removed from his original proposals put forward on 14 December 2017. This would have meant Scottish Taxpayers earning between £43,525 and £58,500 would have seen a tax cut rather than the intended increase.
To close this ‘loophole’, the 2017/18 Higher Rate threshold will only increase by 1% to £43,430, as opposed to the planned original £44,274.
So, the following thresholds will apply:
Looking at the above bands with the proposed rates and adding the value of the UK-wide Personal Allowance of £11,850 for 2018/19 gives the following, with a comparison to 2017/18:
Essentially, the revisions announced by Mr Mackay mean that more taxable income will be payable at the Higher Rate (41% in Scotland for 2018/19). This is non-savings and non-dividend taxable income (NSND).
In a minority Government, it was always essential that a consensus was reached. With the Scottish Labour and Scottish Conservative parties having vastly different taxation plans, a consensus was never likely to have been reached there.
The Greens had previously indicated that they would only support the Draft Budget if an additional £157 million was allocated to local councils. As a result of the orange / green alliance of the two nationalist parties, local council funding will increase by more than that value.
Importantly for UK payroll professionals, even though the Scottish Rate Resolution will not be debated for another three weeks, we seem to have clarity on both the rates and the thresholds that will apply in 2018/19 for Scottish Taxpayers. This is because the Greens’ support at the Stage 1 Scrutiny will continue to apply until Stage 3 on 21 February 2018 when the Resolution is set.
Mr Mackay’s written comment in Holyrood can be read in full on the SNP Website.