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

2020/212020/21
EarningsUKScottish BudgetDifference
££££
10,000000
15,00050047921
20,0001,5001,47921
25,0002,5002,47921
27,2432,948.602,948.600.00
35,0004,5004,578-78
40,0005,5005,628-128
45,0006,5006,992-492
50,0007,5009,042-1,542
55,0009,50011,092-1,592
60,00011,50013,142-1,642
65,00013,50015,192-1,692
70,00015,50017,242-1,742
75,00017,50019,292-1,792
80,00019,50021,342-1,842
85,00021,50023,392-1,892
90,00023,50025,442-1,942
95,00025,50027,492-1,992
100,00027,50029,542-2,042
130,00044,50046,967-2,467
150,00052,50055,167-2,667
175,00063,75066,667-2,917
200,00075,00078,167-3,167
250,00097,500101,167-3,667
300,000120,000124,167-4,167
500,000210,000216,167-6,167
1,000,000435,000446,167-11,167

 

**Land and Buildings Transaction Tax Rates

NPV of rent payableRate of tax
Up to 150,0000%
£150,001 to £2 million1%
Above £2 million2%

 

***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)