Key outcomes from the 2020 draft Scottish Budget

Hazel Gough, Tax Partner at Chiene + Tait runs through some of the main headlines from the Scottish Budget.

The Scottish Budget didn’t offer much in the way of headline messages, but as with all budgets, there were some key points in the details delivered by Public Finance Minister Kate Forbes.

Normally, the Scottish Government will have prepared their Budget, following the UK Chancellor’s plans delivered in the UK Budget before setting out any tax changes or spending plans. This means that this draft Scottish Budget could well be revised following Sajid Javid’s announcement on 11th March.

  • The point at which a Scottish taxpayer pays more income tax than the rest of the UK is £27,243, the personal allowance is set by Westminster and assumes this amount will remain at £12,500*. The Scottish rate of income tax applies to earned income, pension income and rental income. Tax on savings and dividends is not affected by the Scottish Budget.
  • Forthcoming planned increases to National Insurance thresholds by the UK Government will have an impact on all income tax payers across the UK.
  • A new Land and Buildings Transaction Tax (LBTT) rate of 2% will be payable where the net present value (NPV) of the rent under a commercial lease is above £2 million.**
  • Business rates will change and 95% of properties in Scotland will be subjected to a lower poundage than other parts of the UK in order to “maintain the most generous non-domestic rates regime in the UK”***

Let’s wait and see what will happen after 11th March. This draft Budget could be amended radically, or set in stone. With Brexit looming, large scale changes to the UK tax landscape may be an unwelcome, additional burden.

To view the draft Scottish Budget in full, visit the Scottish Government website here.

 

*Chartered Institute Of Taxation’s Scottish Income Tax Liabilities for the 2020/21 Tax Year

2020/21 2020/21
Earnings UK Scottish Budget Difference
£ £ £ £
10,000 0 0 0
15,000 500 479 21
20,000 1,500 1,479 21
25,000 2,500 2,479 21
27,243 2,948.60 2,948.60 0.00
35,000 4,500 4,578 -78
40,000 5,500 5,628 -128
45,000 6,500 6,992 -492
50,000 7,500 9,042 -1,542
55,000 9,500 11,092 -1,592
60,000 11,500 13,142 -1,642
65,000 13,500 15,192 -1,692
70,000 15,500 17,242 -1,742
75,000 17,500 19,292 -1,792
80,000 19,500 21,342 -1,842
85,000 21,500 23,392 -1,892
90,000 23,500 25,442 -1,942
95,000 25,500 27,492 -1,992
100,000 27,500 29,542 -2,042
130,000 44,500 46,967 -2,467
150,000 52,500 55,167 -2,667
175,000 63,750 66,667 -2,917
200,000 75,000 78,167 -3,167
250,000 97,500 101,167 -3,667
300,000 120,000 124,167 -4,167
500,000 210,000 216,167 -6,167
1,000,000 435,000 446,167 -11,167

 

**Land and Buildings Transaction Tax Rates

NPV of rent payable Rate of tax
Up to 150,000 0%
£150,001 to £2 million 1%
Above £2 million 2%

 

***Scottish Levels of Business Rates

Basic Property Rate (Poundage) 49.8p
Intermediate Property Rate (rateable values between £51,000 – £95,000) 51.1p (poundage +1.3p)
Higher Property Rate (rateable value above £95,000) 52.4p (poundage +2.6p)