The Scotland Act 2016 conferred on the Scottish Parliament the power to set all income tax rates and bands for the non‐savings non‐dividend (NSND) income of Scottish taxpayers.
The responsibility for defining the income tax base, which includes the setting or changing of income tax reliefs and exemptions, including the Personal Allowance, remains with the UK Government.
HMRC is responsible for the collection and management of Scottish Income Tax.
Significant changes to Scottish Income Tax were implemented in the Scottish Budget 2018‐19 with the introduction of two new bands and a change to some existing rates. A commitment was made by the Cabinet Secretary for Finance, Economy and Fair Work that the new five‐band structure should be seen as settled for the remainder of this parliament.
After some drama and resignations, Kate Forbes delivered the Scottish budget, 6th February 2020, which makes no changes to rates, and does not introduce or remove any bands. In the 2018 Autumn Budget, the UK Government announced that the UK‐wide Personal Allowance would be frozen at £12,500 in 2020‐21 and this has formed the basis of the Scottish assumptions for income tax revenue.
The Scottish Parliament expect this to be confirmed by the UK Government in their Budget on 11 March 2020. The below table sets out the Scottish Government’s proposed rates and bands for 2020‐21.
So assuming the individual tax free amount of £12,500 the proposed tax bands are indicated as follows:
The Scottish Government claim the approach ensures lower and middle earning taxpayers do not see their taxes rise. This has been delivered for 2020‐21 through an inflationary increase in the Basic and Intermediate Rate thresholds and no changes to the rates of tax.
To raise additional revenue to invest in the Scottish economy, the Higher Rate Threshold is frozen at £43,430 and the Top Rate Threshold frozen at £150,000.
They assume that the UK Budget on 11 March will freeze the Higher Rate Threshold in the rest of the UK in cash terms at £50,000.
56 per cent of Scottish income taxpayers will pay less tax than people earning the same in the rest of the UK in 2020‐21. No Scottish taxpayer will pay more income tax than last year.