The Scottish Government has published its Draft Budget for 2018-19, which includes proposals to set new Scottish rates of income tax. The Government has stated that proposals should mean that those earning under £33,000 will pay less income tax in 2018-19 than in 2017-18, with higher earners paying proportionately more.

The new scheme will have five bands instead of three, with the higher and top rates each being increased by 1 percentage point, as follows:

Annual salary	Band name	Rates (%)
£11,850 – £13,850	Starter	19
£13,850 – £24,000	Basic	20
£24,000 – £44,273	Intermediate	21
£44,273 – £150,000	Higher	41
Above £150,000	Top	46

Concerns have been raised regarding exactly how this new approach will impact Gift Aid in Scotland, given that Gift Aid has been designed to work as part of a UK-wide tax system.

Asked for comment HM Treasury officials have told CTG:

“Ahead of the devolution of Scottish income tax powers, the government discussed with charities the potential implications for Gift Aid of UK and Scottish income tax rates diverging. Having listened to their views and to ensure the effective operation of gift aid across the UK, the government decided that it would not make changes at that time.  This means that charities should continue to claim relief at UK basic rate whether the donor was or was not a Scottish taxpayer. The Government remains committed to the continued effective operation of Gift Aid in all parts of the UK and will continue to consider all issues affecting this and all other charity tax reliefs as part of its regular dialogue with the charity sector”.

**UPDATE** HM Treasury officials have also given the following information regarding those paying tax at a rate other than the Basic Rate.

Scottish donors paying at rates above the Basic Rate

If you pay tax above the Basic Rate you can claim the difference between the rate you pay and basic rate on your donation. Do this either:

• through your Self Assessment tax return
• by asking HM Revenue and Customs (HMRC) to amend your tax code

For example: if you donate £100 to charity – they claim Gift Aid to make your donation £125. You pay tax at 41% so you can personally claim back £26.25 (£125 x 21%). This applies if you pay at the Higher or Additional rate, or if you are a Scottish taxpayer and you pay at the Scottish Intermediate, Higher or Top rate.

Scottish donors who pay tax at the new Starter Rate

To claim Gift Aid on a donation to charity you must have paid the same amount or more in Income Tax or Capital Gains tax in that year as the amount of Gift Aid being claimed. It does not matter at what rate you have paid tax, only that your total tax should be equal to or greater than the amount of Gift Aid being claimed.

The amount of Gift Aid that is claimed is 25p for every £1 that you donate, regardless of whether you are a Scottish taxpayer or not.

Barclay Review of non-domestic rates

The Scottish Government has also accepted all the remaining recommendations from the Barclay review of non-domestic rates, with the exception of the removal of charity relief entitlement for certain university properties and for ALEOs. This will mean that charitable business rates relief will be removed for private schools in Scotland, though the review makes no comment on their overall charitable status.