The Scottish Government has announced changes to income tax bands which could see some middle earners pay more tax from next April.

The draft Scottish Budget for 2018/19, introduced by Finance Secretary Derek Mackay on Thursday, sets out plans to increase the total number of income tax bands from three to five.

Under the changes some basic-rate taxpayers will pay less, but those earning about 33,000 or more are likely to pay more. Someone earning 40,000 is likely to pay an extra 140 a year.

The new rates apply to anyone who lives in Scotland.

The Scottish Government was given the power to set income tax rates and bands last year, and the new rates proposed by Mackay will now have to be voted on by the Scottish Parliament in the New Year.

How are Scottish income tax rates changing?

Here's the full detail of the changes:

Income tax bands in Scotland

Tax band Current threshold Current rate Proposed threshold from April Proposed rate from April
Personal allowance Up to 11,500 0% Up to 11,851 (1) 0%
Basic rate 11,501 to 43,000 20% 11,851(1) to 13,850 19%
13,851 to 24,000 20%
24,001 to 44,273 21%
Higher rate 43,001 to 150,000 40% 44,274 to 150,000 (2) 41%
Additional rate Over 150,000 45% Over 150,000 (2) 46%
1) Assumes individuals are in receipt of the standard UK personal allowance. 2) Those earning more than 100,000 will also see their personal allowance reduced by 1 for every 2 earned over 100,000.

'No-one earning less than 33,000 will pay more'

In his Budget speech, Mackay said the changes would "make Scotland's income tax system even fairer and more progressive".

He added: "I can announce today that I will introduce a new Scottish 'starter' rate of income tax of 19p.

"This new rate will apply to the first 2,000 of taxable income between 11,850 and 13,850.

"The new 'starter' rate, combined with the increase in the personal allowance, will ensure that no-one earning less than 33,000 which is 70% of all taxpayers will pay any more in tax than they do now for given incomes."

Martin Lewis
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