Supporting recovery through the tax system

Retail, hospitality, leisure and aviation businesses will get 100% non-domestic rates relief extended for at least an additional three months, Finance Secretary Kate Forbes confirmed as part of the Scottish Budget.

The continued support for the sectors most affected by the coronavirus (COVID-19) pandemic will be funded by the rates relief voluntarily returned by businesses, including retailers.

For the first time in the history of the Scottish Parliament, the poundage – the non-domestic rates tax rate – has been reduced mid-revaluation from 49.8 to 49 pence saving ratepayers more than £120 million and delivering the lowest poundage in the UK.

In order to protect people’s incomes, local authorities are to be given £90 million of funding – the equivalent of a 3% increase – on top of the local government settlement to compensate councils who choose to freeze their council tax.

And to deliver stability and certainty from the tax system, there will be no changes to income tax rates this year.

During her Budget statement, Ms Forbes also set out plans to:

• increase the starter band, basic band and higher rate threshold of income tax by inflation

• freeze the top rate threshold of income tax in cash terms at £150,000

• return the ceiling of the nil rate band for residential land and buildings transaction tax (LBTT) to £145,000 from 1 April, as planned

• continue first-time buyer relief, which raises the nil rate band for LBTT to £175,000 and results in a reduction of tax of up to £600

• increase the standard rate of Scottish landfill tax to £96.70 per tonne and the lower rate to £3.10 per tonne to ensure consistency with planned landfill tax charges in the rest of the UK

Ms Forbes said:

“This Budget is focused on delivering tax policies that will support economic recovery and maintain our commitment to creating a fairer and more progressive tax system. It is about striking the right balance between raising the revenue required to fund our public services and supporting the economic recovery through targeted interventions. 

“This includes using the rates relief handed back by businesses to help fund a three month 100% rates relief extension for the sectors that have been hardest hit by the pandemic.

“Should the UK Government bring forward an extension to its equivalent rates relief that generates consequential funding, we will match the extension period as part of a tailored package of business support measures.

“During this time, it is vital that we also continue to support households and families. That is why I have ensured that no Scottish taxpayer will pay more income tax in 2021-22 than they do now on their current income and, for a fourth consecutive year, more than half of Scottish income taxpayers will pay less tax than if they lived anywhere else in the UK.

“In recognition of the increasing pressures on many family budgets, I am also providing local councils with £90 million on top of their settlement of £11.6 billion to freeze the council tax. This will ensure that while council tax bills won’t go up, there will be no impact on vital local services.

“Now is a time for stability, certainty and targeted support for the individuals and businesses who have been most impacted by the pandemic and our tax policy delivers this.”

Background

The Scottish Budget 2021-22 document is available online.

Full details of the budget are available at www.gov.scot/budget

See more from @ScotGov on Twitter and follow #ScotBudget for updates.