Despite the continuing uncertainty surrounding Brexit, the Chancellor delivered his Spring Statement on 13th March. The purpose of this statement is to update the House of Commons and the country on the state of the economy; it is not intended to include any major tax announcements, and none were made by the Chancellor.
As already announced, the personal allowance and the higher rate tax threshold increased on 6th April 2019. The personal allowance rises to £12,500 and the basic rate band to £37,500, which means that for most taxpayers the higher rate tax threshold will be £50,000. These thresholds were due to come into effect from 6th April 2020 but the Chancellor announced that the start date would be brought forward by one year. Note that the limits will then remain the same for 2020/21.
Changes to Scottish income tax bandings are set out below.
SCOTTISH INCOME TAX RATES FOR 2019/20
The Scottish Parliament has the power to set income tax rates on non-savings and non-dividend income for Scottish taxpayers. It has been confirmed that the 5-band structure and tax rates (19%, 20%, 21%, 41% and 46%) will remain the same for 2019/20. The thresholds for lower tax rates will rise in line with inflation and the higher rate threshold has been frozen.
The 41% Scottish higher tax rate will apply to taxable income in excess of £30,930 as the higher rate threshold will be frozen (at £43,430 when the personal allowance is taken into account). The 46% additional rate will continue to apply to income in excess of £150,000.
Scottish taxpayers (who live most of the time in Scotland) are given an S prefix PAYE code to ensure that they pay the right amount of tax on their employment income. It is important that HMRC is advised of their correct residential address.
LAND AND BUILDINGS TRANSACTIONS TAX
Land and Buildings Transactions Tax is the Scottish equivalent of Stamp Duty Land Tax. For residential properties, the rates and bands for land and buildings transactions tax (“LBTT”) will be unchanged for 2019/20, although the additional dwelling supplement will be increased from 3% to 4%.
The lower rate for non-residential properties will be reduced from 3% to 1%, and the upper rate increased from 4.5% to 5%. The upper rate will apply to the portion of the purchase price over £250,000 (reduced from £350,000).
If you have any questions about these changes in taxation please get in touch with the MMGA tax team who will be happy to provide advise based on your circumstances.