Scottish and Welsh taxes update
Scottish and Welsh taxes update
Tue 09 Jan 2018
The process of devolving tax powers is well underway and we can expect to see a number of major changes in the following months and years.
As regards Scotland, Revenue Scotland (RS) have an excellent web-site (which can be accessed here – including a regular Technical Bulletin) which contains a large amount of useful information including, for example, updated technical guidance.
It is worth noting that the most recent copy of the RS LBTT Technical Bulletin confirms the view of RS that share pledges may give rise to problems with group relief for LBTT: the view of Revenue Scotland is that the pledging of the shares constitutes an ‘arrangement’ under which a person (i.e. the lender holding the share pledge) could obtain control of the subsidiary but not the parent.
That bulletin also confirms that RS has concluded that in relation to in specie property transfers between pension schemes, whilst the transfer is still considered a land transaction, the debt in the form of the liability assumed to pay benefits to pension scheme beneficiaries will not generally be considered to be given as chargeable consideration in relation to such transactions. However, any consideration given in the form of money or money’s worth for the transfer of the properties will be chargeable to LBTT. This view applies prospectively and retrospectively, so consideration may need to be given to possible LBTT reclaims.
Wales is moving rapidly towards taking on two taxes as from 1 April 2018 and the Welsh Revenue Authority (WRA) has a web-site – see here – and agent registration is due to commence shortly.
For a further discussion of the tax implications of UK tax devolution for your business or personal circumstances, please get in touch with a member of the Mazars tax team.
Below are some notes on Scottish and Welsh tax rates:
Scottish taxes
Proposed Scottish tax rates for 2018/19 set out in the draft Scottish Budget can be found here. The income tax bands were updated on 31 January 2018 as can be seen here.
It may be necessary to consider both Scottish and UK income tax thresholds for Scottish taxpayers, depending on what income they have. Those able to switch between earned income and savings or corporate income should be considering how they structure their business and investment affairs.
A summary of the main rates and bands are:
Income tax
| Bands | Band name | Rates (%) |
| Over £11,850*-£13,850 | Starter Rate | 19 |
| Over £13,850-£24,000 | Basic Rate | 20 |
| Over £24,000-£43,430 | Intermediate Rate | 21 |
| Over £43,430-£150,000** | Higher Rate | 41 |
| Above £150,000** | Top Rate | 46 |
* Assumes person is in receipt of the Standard UK Personal Allowance
** Personal Allowance is reduced by £1 for every £2 earned over £100,000
The Scottish parliament does not set the tax rates for savings income or for companies (or for national insurance). As a reminder these are as follows for 2018/19:
| Bands | Band name | Rates (%) |
| Over £11,850*-£46,350 | Basic Rate | 7.5% |
| Over £46,351 – £150,000 | Higher rate | 32.5% |
| Over £150,000 | Additional Rate | 38.1% |
* Assumes person is in receipt of the Standard UK Personal Allowance
In addition there will be a £2,000 dividend allowance and a savings allowance of £1,000 (basic rate) or £500 (higher rate) depending on the income level according to UK bands.
The corporation tax rate for 1 April 2018 to 31 March 2020 is 19%, and from 1 April 2020 is 17%.
National insurance rates are as follows:
| Bands | E’ees class 1 | E’ers NI | Class 2 | Class 4 |
| Up to £6,205Over £6,025 | Nil£2.95/wk | |||
| Up to £162/wk (£8,424/yr) | Nil | nil | nil | |
| Above £162/wk to £895/wk | 12% | 13.8% | 9% | |
| Above £895/wk (£46,350/yr) | 2% | 13.8% | 2% |
Land & Buildings transaction tax
| Residential transactions | Non-residential transactions | Non-residential leases | |||
| Purchase price | LBTT Rate | Purchase price | LBTT Rate | Net present value of rent payable | LBTT Rate |
| Up to £145,000* | 0% | Up to £150,000 | 0% | Up to £150,000 | 0% |
| £145,001 to £250,000 | 2% | £150,001 to £350,000 | 3% | Over £150,000 | 1% |
| £250,001 to £325,000 | 5% | Over £350,000 | 4.5% | ||
| £325,001 to £750,000 | 10% | ||||
| Over £750,000 | 12% | ||||
* The 0% rate for first time buyers will be £175,000.
Welsh taxes
On 11 December 2017 the Welsh Government released further information on proposed Welsh taxes. A factsheet is available here. Welsh land transaction tax (LTT) will apply from 1 April 2018.
In a statement on 11 December, Mark Drakeford, Cabinet Secretary for Finance, set starting threshold for land transaction tax residential rates will be set at £180,000.
The residential rates will be:
| Price threshold | LTT rate |
| £0-£180k | 0% |
| £180k-£250k | 3.5% |
| £250k-£400k | 5% |
| £400k-£750k | 7.5% |
| £750k-£1.5m | 10% |
| £1.5m-plus | 12% |
Residential leases will not be subject to LTT.
The non-residential rates will remain as announced in October 2017 as follows:
| Non-residential LTT rates | |
| Price threshold | Rates |
| £0 – £150,000 | 0% |
| £150,000 – £250,000 | 1% |
| £250,000 – £1m | 5% |
| £1m plus | 6% |
| Non-residential LTT lease rates | |
| Net present value threshold | Rates |
| £0 – £150,000 | 0% |
| £150,000 – £2m | 1% |
| £2m plus | 2% |
HMRC has published some guidance on the transition from SDLT to LTT here.
The Welsh Government will only be able to vary Welsh income tax rates from April 2019. From April 2019, the UK government will reduce each of the three rates of income tax – basic, higher and additional rate – paid by Welsh taxpayers by 10p. The National Assembly for Wales will then decide the three Welsh rates of income tax, which will be added to the reduced UK rates. The combination of reduced UK rates plus the Welsh rates will determine the overall rate of income tax paid by Welsh taxpayers.
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