The Scottish Budget has no tax surprises
The draft Scottish Budget has been presented in the Scottish Parliament ahead of March’s Westminster Budget. Income tax rates are unchanged and most tax bands rise in line with inflation. The temporary increase to the starting point for land and buildings transaction tax will end as planned. However, without a working majority, the Scottish Nationalist Party (SNP) will need opposition support to pass its budget.
Job retention schemes have protected the Scottish labour market, so employment is expected to fall by only 1.5% during 2021, with unemployment peaking at 7.6%. Average earnings should grow by 2.6%. The GDP forecast is 2% growth for 2021, but no recovery to pre-Covid-19 levels until 2024.
Income tax
Tax rates for 2021/22 are:
| tax income | band | rates |
|---|---|---|
| 0 to £2,097 | Starter | 19% |
| £2,098 to £12,726 | Basic | 20% |
| £12,727 to £31,092 | Intermediate | 21% |
| £31,093 to £150,000 | Higher | 41% |
| Over £150,000 | Top | 46% |
Low earners will pay less tax than the rest of the UK, although those with income above £27,392 will pay more. However, all Scottish taxpayers will pay slightly less tax compared to the current year.
Land and buildings transaction tax
From 1 April 2021, the nil rate threshold reverts to £145,000, with a £175,000 threshold for first-time buyers. There are no other changes; the additional residential property rate remains at 4%.
Non-domestic rates
The basic poundage rate will be cut to 49p so that liabilities for 2021/22 are no higher than before the pandemic.
Various Covid-19 reliefs will continue, although the 1.6% universal relief will end as planned on 31 March 2021. However, 100% relief for the retail, hospitality, leisure and aviation sectors will be extended for at least three more months into 2021/22; to be funded by receipts from businesses repaying relief for 2020/21. Any equivalent extension made by the UK government will be matched. A range of other reliefs are to be introduced in response to current economic conditions.
The Scottish Budget is subject to legislation and could still be amended following the Westminster Budget. Full details, along with supporting documents, are on the Scottish parliament’s website.
