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Scottish Budget 2018-19

MACO business Derek Mackay MSP, Cabinet Secretary for Finance and the Constitution delivered his Scottish draft budget for 2018-19 in the Scottish Parliament on 14th December 2017.

The Scottish Budget will go through the first stage of the legislative process at the end of January 2018 in the Scottish Parliament.

As the SNP Government is a minority administration deals will inevitably have to be stuck by the Government, most likely with the Green Party, in order to get the Budget voted through Parliament.

So we do expect some further revisions and compromises to be made on some of the measures announced yesterday. We do not however expect much divergence from the income tax reforms published yesterday given the Green Party's position on income tax.

We'll keep a watching brief and will publish further updates on these pages as and when they emerge. 

The key points from Derek Mackay's speech are below - 

“This budget builds on the bold and ambitious plans outlined by the First Minister in the Programme for Government, ‘A Nation with Ambition’. It invests in economic opportunity for all, in public services that are fit for the future and in a fairer, more inclusive Scotland.

Our spending choices are made in the context of the continued reduction in the discretionary block grant we receive from the UK Government. Between 2010-11 and 2019-20 this will fall by £2.6 billion in real terms and over the next two years alone we face real terms cuts of over £500 million in the block grant we receive for day-to-day spending.

As a result, this budget sets out how we will use the devolved powers of our Parliament to mitigate further cuts and to deliver a strong, dynamic economy supported by investment in public services, education, business, infrastructure and tackling inequality”. Source: The Scottish Draft Budget 2018-19.

Some of the key business, personal, property and economic measures announced yesterday included:

Business MACO performance

  • Business Rates: increases will be capped at the September 2017 CPI (3%) rather that the RPI (3.9%). The small business bonus scheme is to continue and £720m package announced for business rates relief package.
  • New funding: £340m has been set aside to the establish the Scottish national investment bank, with £150m to be made available over the next two years to help build up a fund whilst the bank is being set up
  • Business research and investment is rise by 70% and £10m will be provided for the new south of Scotland enterprise agency with a further £18m earmarked for the new national manufacturing institute in Renfrewshire and £122m more for city region deals.
  • The economy, jobs and fair work portfolio will be given an extra £270 in 2018-19.
  • £600m of funding over the next four years for supporting the procurement of the Reaching 100 superfast broadband programme

Personal Maco Icons2

  • A new Scottish starter rate will be introduced: earnings between £11,850 and £13,850 will be taxed at 19%. The basic rate of income tax has been frozen at 20p, but a new intermediate rate of 21p will be established for those earning between £24,000 and £44,290. The higher rate of tax will rise by 1p to 41p with the additional rate of tax will be increasing by 1p to 46p.

There will some who gain and some who lose from these changes, but what is very clear is that the reforms will inevitably lead to further complexity in calculating taxes, especially for clients with interests north and south of the border.

As income tax is only partially devolved under the Scotland Act 2016, Scottish taxpayers will continue to pay income tax on their savings and dividend income according to the rates and bands set by the UK Parliament (see our Tax Rate Card 2017-18 >download), whereas non-savings and non-dividend income e.g. salary, will be taxed according to the new Scottish Rate of Income Tax (SRIT) rates and bands as set out below.

Please note that individual's circumstances will vary and you should seek professional advice before making any decisions relating to your personal finances.

SRIT BANDS                                     SRIT RATES                                SRIT BAND NAME                  
£11,850-£13,850  19% Starter
£13,850-£24,000 20% Basic
£24,000-£44,273 21% Intermediate 
£44,273-£150,000 41% Higher
£150,000+ 46% Top


  • Following the UK Chancellors announcement of relief for first time buyers, Derek McKay announced that Land and buildings transaction tax (LBTT) will not apply to properties purchased under £175,000. This raises the nil-rate threshold from the current £145,000. A consultation will be launched before the relief is introduced in April 2018. LBTT rates and bands and the Additional Dwelling Supplement rate of 3% remain the same.  

Economy MACO invest

  • The Scottish Fiscal Commission (SFC) in its first economic forecast predicted that Scotland is unlikely to benefit from previous economic boosts from oil, construction, an increasing workforce and consumer spending in the near future. Instead, Scotland’s economy is likely to be dragged down by Brexit, a global trade downturn, ageing population, a weak oil sector and falling personal savings.
  • Economic growth is predicted to be 0.7% this year and next and well below the 2% historic growth rate experienced before the financial crisis.
  • The sluggish GDP growth is driven by the slow growth trend in productivity – 0.2% in 2017 and 0.5% is predicted for 2018. The knock on effects on wage growth which is predicted to fall from 3.3% in 2016 to 2.3% in 2018 before getting back to last year’s level in 2022.

We will keep you posted on the likely impacts of the changes and any future Scottish Government announcements released as the legislation goes through the Scottish Parliament in early 2018. MACO TAX RATES 2017 18

If you have any questions about the summary’s contents or how any aspects of your tax and financial planning may be affected by the proposals contained in the Scottish Budget 2018-19 announcement, please get in touch with your usual Martin Aitken & Co or Martin Aitken Financial Services Ltd contact to discuss. We will be pleased to hear from you. 

This summary has been prepared very rapidly and is for general information only. All statements within this document are based on our understanding of the changes proposed within the 14 December 2017 Scottish Budget.

You are recommended to seek professional advice before taking any action on the basis of the contents of this summary. Publication date: 15 December 2017





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