New Scottish and Welsh tax rates from April 2018

Scotland will have its own set of income tax rates and bands from April 2018. A new Land Transaction Tax (LTT) will also be introduced in Wales from 1 April 2018, marking new significant stages of tax devolution.

Tax devolution first started in 2015 when Scotland replaced stamp duty land tax (SDLT) with land and buildings transaction tax (LBTT). Scotland then introduced a lower higher rate band for income tax from April 2017. The latest changes, however, represent a more significant step away from the Westminster system.

The Scottish Government has announced the following proposals for income tax rates and bands for 2018/19:

First £2,000 Starter Rate 19%
£2,001 to £12,150 Basic Rate 20%
£12,151 to £31,580 Intermediate Rate 21%
£31,581 to £150,000 Higher Rate 41%
Over £150,000 Top Rate 46%

The new system includes five bands, compared to three across the rest of the UK, and only the basic rate will be the same. Despite this change Scotland will have the same personal allowance (£11,850), and the rest of the UK rates and bands will continue to apply to savings and dividend income, as well as capital gains. This means tax calculations for some Scottish taxpayers are not going to be for the faint of heart. The measures are still before the Scottish Parliament and subject to final agreement.

When it comes to SDLT, LBTT and LTT, there are consistent elements. For example, the 3% surcharge for additional residential properties applies to all three. However, Scotland and Wales plan on responding to the £300,000 SDLT exemption for first-time buyers in England in different ways.

Scotland intends to introduce its own first-time buyer threshold of £175,000, but this is subject to consultation. Wales has simply increased the nil rate threshold for LTT from £150,000 to £180,000. This is much more generous than the SDLT threshold of £125,000, but well-funded first-time buyers will lose out. The tax affairs of those with cross-border interests are becoming increasingly complex.

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