Tax Planning – New rates and bands on the way

Year End Tax Planning

The UK Budget set out an increase in the personal allowance, which rises from £11,500 in 2017/18 to £11,850 in 2018/19. The basic rate band is £33,500 in 2017/18 and £34,500 in 2018/19. So the threshold at which the 40% band applies increases from £45,000 to £46,350 for those who are entitled to the full personal allowance.

For taxpayers treated as resident in Scotland, it’s a different story. In 2017/18, (other than for savings and dividend income, where the £33,500 basic rate band applies), the basic rate income tax band for Scottish residents is £31,500. This means that Scottish taxpayers will generally pay higher rate tax if their income (other than savings and dividend income) exceeds £43,000, or if total income exceeds £45,000.

The Scottish Budget 2018/19 proposals include new tax rates and also new bands, making a total of five tax bands in all. For 2018/19, the rates and tax bands applicable to Scottish taxpayers on income other than savings and dividend income are expected to be as follows:

Scottish Bands Band name Scottish Rate
Over £11,850 – £13,850 Starter 19%
Over £13,850 – £24,000 Basic 20%
Over £24,000 – £43,430 Intermediate 21%
Over £43,430 – £150,000 Higher 41%
Over £150,000 Top 46%

The figures above assume the individual is entitled to a full UK personal allowance. The personal allowance will be reduced if an individual’s adjusted net income is above £100,000. The allowance is reduced by £1 for every £2 of income over £100,000.

There is also change in sight for Welsh taxpayers, with Welsh rates of income tax in prospect from 6 April 2019.

Duncan R Glassey
Senior Partner – Wealthflow LLP

duncan.glassey@wealthflow.com

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