2017/18 Scottish Budget: your essential overview


Susie Walker

Susie Walker

Partner & Head of Tax


Finance Secretary Derek Mackay unveiled his first draft Scottish Budget this afternoon. His style was one of speed, lacked any heckling and was over in a matter of minutes. 

There were several positives announced around additional funding for schools, roads and services. For tax we got the most significant sign so far that the Scottish Government are willing to do things differently. No increases in income tax rates were announced, but the higher rate tax threshold reduction that the UK Chancellor announced in his Budget will not be passed on to Scottish taxpayers. Consequently, everyone in Scotland earning more than £43,430 will pay tax at 40%, whereas south of the border the 40% rate will begin to bite at £45,000. 

Below are the key points about the wider tax announcements; these proposals are subject to Parliamentary approval and will be voted upon in February 2017.

For those based outside of Scotland, please note that these changes may still affect your property and business interests. 

Income tax rates

  • The Finance Secretary confirmed that there will be no change in income tax rates applying from 2017/18. 
  • The basic rate of income tax will continue to be levied at 20%; higher rate tax at 40% and additional rate tax at 45% on non-savings income such as employment, self-employment and rental income.
  • The Scottish Parliament has powers to set tax bands as well as tax rates and the Finance Secretary announced proposals in his Budget speech.
  • The higher rate threshold for 2017/18 is to be set at £43,430 whereas in the rest of the UK, this will be £45,000. Those fully affected will pay £314 more in income tax than taxpayers in other parts of the UK.

Land and Buildings Transaction Tax (LBTT)

  • No changes were announced to the rates of LBTT. The current progressive rates therefore continue to apply. 
  • The additional dwelling supplement (ADS) may apply to certain transactions. Where applicable, this will incur a 3% LBTT charge on the purchase price of residential property.

Air Passenger Duty (APD)

  • The government will introduce a Bill in the forthcoming months to introduce a replacement for the current APD in Scotland.  It is intended to take effect from 1 April 2018.  
  • The government’s proposal is to reduce APD by 50% by the end of the current Parliament (2021) with the intention of maintaining existing routes, generating new routes, and increasing inbound tourism.

The Apprenticeship Levy

  • This will proceed as planned. Announcements were made today on how this funding will be spent however unlike in England, no details were provided on how the levy will be administered.

As always, please get in touch with your local Johnston Carmichael adviser should you wish to discuss these measures in more detail.