Finance Secretary: Income tax reforms will benefit lowest earners

More than two thirds of income taxpayers will pay less tax next year on their current income, Finance Secretary Derek Mackay has confirmed as MSPs prepare to debate proposals to reform income tax in Scotland.

Mr Mackay said the new starter rate of income tax, combined with an increase in the personal allowance, will result in 70% of all income taxpayers paying less tax than they do this year on current incomes and raise additional revenue to support vital public services and investment in the economy.

If backed by MSPs later today, the Scottish Government’s use of the devolved income tax powers will ensure an additional £428 million in 2018/19 to support a budget that:

  • will protect public services that are free at the point of use, including free prescriptions, free personal care and free tuition
  • will increase the health budget by £400 million
  • will provide above-inflation investment in the police, in universities and colleges and in local government services.

Finance Secretary Derek Mackay said: “The Scottish Government has faced continued austerity from the UK Government. Over a ten year period, Scotland’s block grant will have been cut by £2.6 billion in real terms and we face a £500 million real terms reduction in spending on day-to-day services over the next two years.

“Our progressive approach to reforming income tax will deliver greater tax fairness and protect the lowest earning taxpayers in Scotland. By using our devolved income tax powers we will ensure we have an additional £428 million next year to support a Budget that will help mitigate UK budget cuts, protect our NHS and other public services, support our economy and tackle inequality in our society.

“This is an important day for Scotland’s future and I hope parliament comes together to back our proposals and set income tax rates that will help deliver the best outcomes for the people of Scotland.”

Scottish Income Tax proposed rates and bands 2018-19

Scottish income tax rates Scottish Bands
A Starter Rate of 19% Over £11,850 – £13,850
The Scottish Basic Rate of 20% Over £13,850 – £24,000
An Intermediate Rate of 21% Over £24,000 – £43,430
A Higher Rate of 41% Over £43,430 – £150,000
A Top Rate of 46% Above £150,000

The Scottish Fiscal Commission estimate the policy above will raise an additional £219 million, taking forecast income tax revenues in 2018-19 to £12,177 million.

Following the Scottish Government’s decision in 2017-18 to freeze the higher rate threshold of income tax and the introduction of reformed income tax proposals for 2018-19, income tax policy in Scotland contributes to forecast revenues £428 million above the block grant adjustment to support public spending and investment in the economy in 2018-19.

Income tax Policy proposals in Draft Budget 2018-19: Fact Sheet.

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davepickering

Edinburgh reporter and photographer