Income tax

The Scotland Act 2016 provided the Scottish Parliament with the power to set the rates and bands applying to all non-savings non-dividend (NSND) income tax paid by Scottish taxpayers from April 2017. 

NSND income accounts for about 90% of all income. NSND income is primarily from employment and pensions, and excludes income from savings and dividends.

The Scottish Parliament can:

  • Vary tax rates
  • Change the thresholds between tax bands
  • Change the total number of bands

The personal allowance, the amount of income after which you start paying income tax, remains reserved to the UK Government. Income tax continues to be administered by HMRC.

Latest forecasts

On 12 December 2018, we produced updated forecasts for Income Tax.

NSND income tax forecast – December 2018

£ million 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
May 2018 11,267 11,467 11,969 12,345 12,805 13,335 13,936 14,547
 Outturn data alignment -548 -556 -570 -586 -608 -634 -663 -696
 Economy 0 102 83 142 141 126 86 17
 UK policy measures 0 1 -15 -275 -85 -98 -120 -140
 CPI 0 0 0 -12 -18 -30 -37 -43
 Tax-Motivated Incorporations [1] 0 -2 -4 -5 -15 -27 -35 49
  Other [2] 0 -2 2 -2 -0 1 3 -1
 2017-18 policy recosting  0 -2 -3 22 5 10 7 5
 2018-19 policy recosting 0 0 -10 -12 -11 -12 -15 -17
December 2018 pre-measures 10,719 11,008 11,452 11,615 12,214 12,671 13,162 13,720
 2019-20 policy 0 0 0 68 71 75 80 84
December 2018 post-measures 10,719 11,008 11,452 11,684 12,285 12,746 13,242 13,805
Change from May 2018 -548 -459 -517 -661 -519 -589 -694 -743

Source: Scottish Fiscal Commission (2018) Scotland’s Economic and Fiscal Forecasts December 2018

[1] - The increase in 2023-24 year is as a result of receiving new data for this year from HMRC. This replaces the previous Commission assumptions about the path of Tax-Motivated Incorporations.

[2] - Includes revisions to OBR triple lock pension forecasts, HMRC Gift Aid estimates, and model developments.

[3] - The increase to 2017-18 policy recosting (freeze of higher rate threshold at £43,000) in 2019-20 is as a result of the above inflation UK Personal Allowance increase. This policy costing uses a UK statutory indexation baseline of the Basic Rate Limit and Personal Allowance to calculate the higher rate thresholds. The baseline at May 2018 for 2019-20 was a higher rate threshold of £46,330. The baseline was revised to £46,800 following the Personal Allowance increase, resulting in the policy raising more revenue.

Figures may not sum to totals because of rounding

 

Our report Scotland’s Economic and Fiscal Forecasts for December 2018 contains further information on the methodology used in our forecast.

Supporting information

Scottish Fiscal Commission (2018) Scotland's Economic and Fiscal Forecasts December 2018

Scottish Fiscal Commission (2018) Scotland's Economic and Fiscal Forecasts May 2018

Scottish Fiscal Commission (2018) How we forecast behavioural responses to income tax policy March 2018

Scottish Fiscal Commission (2018) Updated Income Tax Forecasts February 2018

Scottish Fiscal Commission (2017) Scotland’s Economic and Fiscal Forecasts December 2017

Scottish Fiscal Commission (2016) Current Approach to Forecasting

Scottish Government income tax page

UK Government income tax page

HMRC income tax statistics

OBR Scottish tax forecasts