The Scottish Cabinet Secretary for Finance, Kate Forbes, delivered the Scottish Budget on Thursday 28 January 2021.
The Scottish Budget was intended to provide ‘certainty and stability’ for income tax payers, with Scottish taxpayers set to pay slightly less income tax in 2021/22 than in 2020’21, although the measures taken in response to the coronavirus will mean that Scotland's GDP is not expected to recover to pre-pandemic levels until the start of 2024, with unemployment also expected to rise and remain higher than pre-pandemic levels until 2025. The Scottish Budget was labelled as ‘an unprecedented response’ to investing in both the immediate resilience and longer-term recovery of Scottish businesses.
There were a number of specific tax announcements, including that:
Scotland will not be implementing an ‘effective personal allowance’ of £12,750 by the end of this parliamentary term, as had originally been intended;
Scottish income tax rates will remain unchanged and the starter and basic rate bands, as well as the higher rate threshold, will increase by CPI inflation (0.5%). The top rate threshold will remain frozen in cash terms at £150,000;
the ceiling of the nil rate band for residential land and buildings transaction tax (LBTT) will return to £145,000 for transactions with an effective date from 1 April 2021 onwards. First-time buyers will continue to be able to claim the first-time buyer relief, which has the effect of raising the nil rate band to £175,000 and results in a reduction of tax of up to £600;
the existing non-residential LBTT rates and bands for conveyances and leases will remain unchanged;
the additional dwelling supplement (ADS) rate will also remain at 4%;
the Scottish government intends to consult on changes to the ADS rate in the next parliament, in particular in relation to extending the length of time within which a previous main residence must be sold for a repayment to be claimed, and to address various scenarios involving joint buyers;
the planned consultation on legislation to provide for proposed targeted LBTT reliefs related to: the ‘seeding’ (initial transfer) of properties into a property authorised investment fund (PAIF) or co-owned authorised contractual scheme (CoACS); and the exchange of units within a CoACS will be pushed back to the next parliament;
an inflation-based increase will be applied to the standard and lower rate of Scottish landfill tax, ensuring consistency with planned landfill tax charges in the rest of the UK;
changes to business property rates, reducing the basic property rate (poundage) to 49 pence;
the rateable value upper threshold in order to qualify for fresh start relief will be increased from £65,000 to £95,000 to match the higher property rate threshold;
business growth accelerator relief will be expanded to property improvements where there has been a concurrent change of use to incentivise the re-use of existing assets;
confirmation that the Scottish government remains committed to developing a plan for a Scottish air departure tax, but that it remains subject to coming to an agreement with the UK government on the Highlands and Islands exemption;
the delay of the implementation of VAT assignment, which provides for receipts from half of the VAT raised in Scotland to be assigned to the Scottish budget. This had been expected to commence with effect from April 2021 but will now be delayed until the fiscal framework review;
the provision of an additional £90m to compensate councils that choose to freeze their council tax at 2020/21 levels.
The Scottish Cabinet Secretary for Finance, Kate Forbes, delivered the Scottish Budget on Thursday 28 January 2021.
The Scottish Budget was intended to provide ‘certainty and stability’ for income tax payers, with Scottish taxpayers set to pay slightly less income tax in 2021/22 than in 2020’21, although the measures taken in response to the coronavirus will mean that Scotland's GDP is not expected to recover to pre-pandemic levels until the start of 2024, with unemployment also expected to rise and remain higher than pre-pandemic levels until 2025. The Scottish Budget was labelled as ‘an unprecedented response’ to investing in both the immediate resilience and longer-term recovery of Scottish businesses.
There were a number of specific tax announcements, including that:
Scotland will not be implementing an ‘effective personal allowance’ of £12,750 by the end of this parliamentary term, as had originally been intended;
Scottish income tax rates will remain unchanged and the starter and basic rate bands, as well as the higher rate threshold, will increase by CPI inflation (0.5%). The top rate threshold will remain frozen in cash terms at £150,000;
the ceiling of the nil rate band for residential land and buildings transaction tax (LBTT) will return to £145,000 for transactions with an effective date from 1 April 2021 onwards. First-time buyers will continue to be able to claim the first-time buyer relief, which has the effect of raising the nil rate band to £175,000 and results in a reduction of tax of up to £600;
the existing non-residential LBTT rates and bands for conveyances and leases will remain unchanged;
the additional dwelling supplement (ADS) rate will also remain at 4%;
the Scottish government intends to consult on changes to the ADS rate in the next parliament, in particular in relation to extending the length of time within which a previous main residence must be sold for a repayment to be claimed, and to address various scenarios involving joint buyers;
the planned consultation on legislation to provide for proposed targeted LBTT reliefs related to: the ‘seeding’ (initial transfer) of properties into a property authorised investment fund (PAIF) or co-owned authorised contractual scheme (CoACS); and the exchange of units within a CoACS will be pushed back to the next parliament;
an inflation-based increase will be applied to the standard and lower rate of Scottish landfill tax, ensuring consistency with planned landfill tax charges in the rest of the UK;
changes to business property rates, reducing the basic property rate (poundage) to 49 pence;
the rateable value upper threshold in order to qualify for fresh start relief will be increased from £65,000 to £95,000 to match the higher property rate threshold;
business growth accelerator relief will be expanded to property improvements where there has been a concurrent change of use to incentivise the re-use of existing assets;
confirmation that the Scottish government remains committed to developing a plan for a Scottish air departure tax, but that it remains subject to coming to an agreement with the UK government on the Highlands and Islands exemption;
the delay of the implementation of VAT assignment, which provides for receipts from half of the VAT raised in Scotland to be assigned to the Scottish budget. This had been expected to commence with effect from April 2021 but will now be delayed until the fiscal framework review;
the provision of an additional £90m to compensate councils that choose to freeze their council tax at 2020/21 levels.
