What did the November Budget mean for private individuals in Scotland?

Chancellor Phillip Hammond delivered his second budget this year – in the new autumn budget format. Below we look at some of the changes that may affect individuals.

Tax Rates - unchanged

  • Basic Rate 20%
  • Higher Rate 40%
  • Additional Rate 45%
  • Dividend tax 7.5%/32.5%/38.1%

The amount of dividend income that can be earned tax free will reduce from £5,000 to £2,000 on 6 April 2018.

November 2017 Scotland Individuals Budget Briefcase Red Tax Personal Income

Allowances

Personal Allowance will be increased to £11,850 from April 2018
The higher rate band will be increased to start at £46,350 from April 2018 (UK)
In Scotland this rate band starts at £43,000 presently, but the Scottish tax bands and rates will be announced in the Scottish Budget due on 14 December 2017.

Capital Gains Tax

From April 2018 the capital gains tax annual exempt amount will increase.

  • Individuals from £11,300 to £11,700,
  • Personal representatives and most trustees from £5,650 to £5,850

Marriage Allowance – claims on behalf of deceased partners

The transferable marriage allowance has been extended to include claims made after one of the partners has died with effect from 29 November 2017. Such claims can be backdated by up to four years provided all other conditions are met. This implements a long-standing recommendation by the Low Income Tax Reform Group (LITRG) and we warmly welcome it. The backdating provision should enable those who have been refused a claim on these grounds to re-apply.

Pension Lifetime Allowance

This was as promised, increased in line with inflation, to £1.03m from April 2018. The annual allowance remains unchanged at £40,000.

Mileage rates – extension to landlords

Landlords will now be able to calculate their tax allowable motoring expenses using the mileage allowance rates set by HMRC, based on the number of business miles they travel in connection with their property businesses, rather than doing a more complicated calculation to apportion the car running costs between business and non-business use. This puts landlords in the same position as the self-employed and will be a welcome simplification for many.

Capital Gains Tax for non-residents

This is to be extended to take cover gains on disposals of all types of UK property, not just those on residential property. It is thought this will bring the UK in line with other countries and remove an advantage which non-residents have over UK residents. The change will apply to gains accrued on or after April 2019. The government intends to include targeted exemptions for institutional investors such as pension funds, but there will be more to come here.

Taxation of trusts

The government will publish a consultation in 2018 on how to make the taxation of trusts simpler, fairer, and more transparent.

Self-assessment debts

From 6 April 2019, HMRC will be allowed to collect tax due under self-assessment through adjustments to PAYE tax codes, which they say will enable them to collect self-assessment tax debts in ‘closer to real-time’. This could affect taxpayers who are employed or in receipt of an occupational or personal pension but who have to complete an annual self-assessment tax return.

Following the introduction of HMRC’s ‘dynamic coding’ initiative this summer, tax codes are now amended in response to changes to an individual’s circumstances as soon as they become known, so that HMRC can ensure most taxpayers have paid the correct amount of tax by the end of the tax year, rather than having a tax bill after the tax year end. This is resulting in frequent changes to tax codes and significant variations in take home pay for many, which is in turn causing some distress and confusion.

Stamp Duty – non-Scottish Properties

The government will amend Stamp Duty Land Tax (SDLT) higher rates for additional properties with immediate effect. From 22 November 2017 first-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660‎ on the average first-time buyer property.

The changes will benefit those increasing their share of their own home, families affected by a divorce court order, and cases where properties are held in trust for children subject to Court of Protection orders.

Closure of Certificate of Tax Deposit scheme

To make the tax system simpler and fairer, the government will close the Certificate of Tax Deposit scheme for new certificates on and after 23 November 2017. Existing certificates will continue to be honoured for six years.

Get in touch

If you are affected by any of these changes, or would like to discuss your personal taxation circumstances, please get in touch with a member of our team.