Finance Secretary for Scotland announces income tax changes in Scottish Budget

Finance Secretary for Scotland announces income tax changes in Scottish Budget

In his draft Budget, Derek Mackay, the Finance Secretary for Scotland, has unveiled a series of changes to the Scottish income tax rates and bands.

Mr Mackay used the Scottish Budget to confirm an increase in income tax rates for higher earners, together with the introduction of two new income tax bands.

Image result for income tax changes in Scottish BudgetThe changes will see the higher rate of income tax increase from 40p to 41p, with the top rate rising from 45p to 46p.

Meanwhile, those earning more than £24,000 a year will be taxed under a new 21p band, and a ‘starter’ rate of 19p will also be introduced.

In addition, the Finance Secretary confirmed that Land and Buildings Transaction Tax (LBTT) will be maintained at its current rates, and announced the introduction of a new relief for first-time homebuyers purchasing property worth up to £175,000 in Scotland.

Commenting on the Scottish Budget announcements made by Mr Mackay, Hugh Aitken, Director of the Confederation of British Industry in Scotland (CBI Scotland), stated: ‘By putting productivity at the heart of the Budget, it’s clear that Derek Mackay has listened to organisations like the CBI that have said consistently that boosting productivity is the only sure-fire way to grow our economy, generate the revenues we need for quality, sustainable public services and raise living standards.

‘But things aren’t all rosy – the prospect of income tax rises and added complexity in Scotland’s tax code will be a bitter pill to swallow.’

The Scottish Budget announcements can be read in full here.


Scottish business groups react to proposal for new independence referendum

Scottish business groups have given a mixed response to the call by the First Minister Nicola Sturgeon for a new referendum on independence from the United Kingdom.

During a recent press conference in Edinburgh, Ms Sturgeon confirmed that she would ‘seek the approval of the Scottish Parliament to open discussions with the UK government on the details of a Section 30 order – the procedure that will enable the Scottish Parliament to legislate for an independence referendum’.


Andy Willox, Scottish Policy Convenor of the Federation of Small Businesses (FSB), said: ‘FSB survey work conducted after last year’s Scottish Parliament elections, but before the poll on Europe, revealed very little appetite amongst smaller firms for another independence referendum.

‘Of course, there’s a lot more going on now – in terms of faltering confidence and rising costs – than there was last May. What we don’t know is if these changes have shifted views one way or the other, but I daresay that will become apparent in the weeks and months ahead.’

Hugh Aitken, Scotland Director of the Confederation of British Industry (CBI), was similarly circumspect, saying: ‘Scottish businesses have acted with resilience since the EU referendum, and, in an already uncertain environment, their priority is clarity as soon as possible on what a future deal could look like.

‘What’s important is that the needs of Scotland – and the other devolved nations – are heard and understood in the discussions on the UK’s future relationship with Europe. The Scottish and UK governments must continue to work together, with business, to ensure the best deal from the negotiations for Scottish firms, and this work should continue as a matter of priority.’

The UK government would need to approve the terms of a Scottish independence referendum. Ms Sturgeon suggested that it should take place sometime between Autumn 2018 and Spring 2019, when the UK’s negotiations to leave the EU become ‘clearer’.

However, Ruth Davidson, leader of the Scottish Conservative and Unionist Party, said: ‘The First Minister’s proposal offers Scotland the worst of all worlds. Her timetable would force people to vote blind on the biggest political decision a country could face.’

Scotland calls for oil and gas tax reform

16 Mar 2015

The Scottish Cabinet Secretary for Finance, John Swinney, has made a plea to Chancellor George Osborne to overhaul the tax system for oil and gas in the upcoming Budget Statement.

The North Sea oil and gas industry has been the subject of discussion lately, after job cuts and the falling price of oil have ravaged the sector. Westminster has already promised to take action in support of the industry.

Mr Swinney said: ‘For the Budget to provide a credible response to the challenges facing the industry, it must firstly correct the damage done by the unexpected increase in the supplementary charge at the 2011 Budget.

‘The underlying problem is that successive UK governments have placed too much emphasis on maximising the short-term tax take from the industry.

‘This has negatively impacted on business confidence, and undermines the industry’s need for a stable long term fiscal environment on which to base their investment decisions.’

Given the recent concerns, Mr Osborne is expected by many to announce a change in the current tax scheme for the oil industry.

New stamp duty rates announced for Scotland

22 Jan 2015

Scotland’s Finance Secretary John Swinney has confirmed that the planned new rates of stamp duty on residential property in Scotland will be amended, following a recent review of the system.

The Scottish property tax system is set to change significantly from 1 April 2015, with the introduction of a new Land and Buildings Transaction Tax (LBTT), which will replace the existing UK system in Scotland.

However, following the overhaul of stamp duty announced by Chancellor George Osborne in the 2014 Autumn Statement, which saw the introduction of new graduated rates, Mr Swinney announced that he would need to review the planned rates and bands for Scotland.

Previously, the threshold at which duty becomes payable in Scotland was to be set at £135,000 with effect from April. Rates were to range from a starting point of 2% up to 12% on the portion of any property costing more than £1m.

Following the review, the starting point for stamp duty in Scotland has now been raised to £145,000, while a 12% marginal rate will apply to properties costing more than £750,000, rather than £1m.

Commenting on the decision, Mr Swinney said, ‘This Government has put fairness, equity and the ability to pay at the very heart of the decisions that we have taken’.

However, MSP Jackie Baillie described the move as ‘the fastest U-turn in history’.

Chancellor George Osborne warned that the new powers being granted to Scotland could result in a UK-wide ‘tax competition’.

Scottish stamp duty to be reviewed

19 Jan 2015

Following a proposal in the Scottish draft Budget to review the Land and Buildings Transaction Tax (LBTT), a discussion is underway to determine plans for the future of stamp duty land tax in Scotland.

Initial plans under discussion are to raise the threshold for paying tax on a residential property from £125,000 to £135,000. Rates will range from 2% to 12% for properties priced over £1 million.

Scottish Finance Secretary, John Swinney, has previously commented that the recent UK stamp duty land tax overhaul was an imitation of the plans already set out in the October draft Budget for Scotland.

He said: The Chancellor’s decision to introduce a new stamp duty system overnight, without warning and consultation, means that while 80% of homeowners continue to pay less tax or no tax at all under the Scottish system we now have the opportunity to review the rates and ensure they are right for Scotland’.

An official decision is expected to be announced on Wednesday.

Scotland set to gain landmark powers over income tax and welfare

27 Nov 2014

The Scottish Parliament is set to gain almost complete control over income tax rates and bands and welfare spending, following the recommendations of the Smith Commission.

However, HM Treasury will retain control of personal allowances and the taxation of savings income and dividends.

The Smith Commission was set up by the UK Government following the ‘No’ vote on Scottish independence. In the words of Lord Smith of Kelvin, the recommendations set out in its report ‘will result in the biggest transfer of power to the Scottish Parliament since its establishment’.

The report recommends that the Scottish Parliament should gain the power to set income tax rates and bands on earned income, and to retain all of the income tax raised in Scotland.

Meanwhile, a share of VAT revenue is also set to be assigned to the Scottish Parliament, while Air Passenger Duty will be fully devolved.

The Scottish Parliament will also be made permanent in UK legislation, and granted new powers over how it is elected and run, including the power to allow 16 and 17-year-olds to vote.

In addition, Scotland will gain the power to create new benefits and make discretionary payments in any area of welfare. A number of benefits, including those affecting the elderly, carers and those who are ill will be fully devolved.

The UK Government will produce draft legislation based on the recommendations of the report. The legislation is set to be published by 25 January 2015.