Fiscal framework outturn report: 2024

2. Tax – Overview of tax revenues, BGA and net Budget position

18. This section provides an overview of the latest information (outturn or forecast) available regarding revenues and BGAs for Income Tax and the fully devolved taxes – LBTT and SLfT.

19. Table 1 includes outturn data for 2022-23 Scottish Income Tax and fully devolved taxes, and for 2023-24 for fully devolved taxes. Scottish tax outturn data is provided by HMRC for Income Tax and by Revenue Scotland for LBTT and SLfT. Outturn data required to calculate the outturn tax BGAs is provided by HMRC.

Note 1: The outturn listed for 2022-23 is final outturn.

Note 2: 2023-24 LBTT and SLfT provisional revenue outturn excludes penalties and accounting adjustments applied by Revenue Scotland

Note 3: The latest Income Tax forecasts from the Scottish Budget 2024-25 do not yet reflect the latest 2022-23 outturn data which was published in July. As such, outturn data and forecasts are currently inconsistent and will be revised at the next fiscal event.

Note 4: 2022-23 LBTT and SLfT outturn BGAs have been updated to reflect ONS’ and NRS’ publication of mid-2022 population estimates. Any funding impact is yet to be agreed between Scottish and UK governments (as per paragraphs 10 – 13).

† Indicates outturn; Figures in this and subsequent tables may not sum due to rounding

20. Table 1 also shows the most recent tax forecasts. Revenue forecasts are taken from the SFC’s Scotland’s Economic and Fiscal Forecasts, published on 19 December 2023.^[3] BGAs are based on forecasts of equivalent UK Government tax revenue prepared by the OBR for the UK Spring Budget published on 06 March 2024. Comparing the forecasts to the BGAs produces the net effect on the Scottish Budget.

21. The forecasts for Income Tax revenues and BGAs for 2023-24 and 2024-25 above do not have any immediate impact on the Scottish Budget, as they do not represent outturn data that will be used as the basis for reconciliations. Income Tax outturn data for 2023-24 and 2024-25 will be available in the summer of 2025 and 2026, respectively. The Income Tax forecasts for the years 2025-26 onwards do not yet reflect the latest 2022-23 outturn data and updated forecasts will be produced by the SFC alongside the Scottish Budget 2025-26 and inform budget decisions.

Taxes yet to be introduced

22. Some tax powers devolved in the Scotland Act 2016 are yet to be implemented: these relate to the introduction of devolved replacements for Air Passenger Duty and the Aggregates Levy.

Air Passenger Duty: Introduction of the Air Departure Tax (ADT) in Scotland has been deferred to allow the issues raised in relation to the Highlands and Islands exemption to be resolved. The Scottish Government will continue work to find a solution for aviation that remains consistent with our climate ambitions, taking account of the UK domestic subsidy control regime.

Aggregates Levy - The Scottish Government introduced an Aggregates Tax and Devolved Taxes Administration (Scotland) Bill in November 2023, which sets out key arrangements for a devolved tax on the commercial exploitation of aggregates.

Although the formal introduction date has not yet been agreed with the UK Government the Scottish Government intends that Scottish Aggregates Tax (SAT) will be introduced on 1 April 2026. In order for SAT to be introduced on that day, the provisions of the 2016 Act which disapply the existing UKAL regime in Scotland will also require to be brought into force by regulations laid by His Majesty’s Treasury in the UK Parliament. Other UK legislation may also be necessary.

In addition, the exact approach to the BGA methodology is still to be agreed before the SAT is introduced.

Assignment of revenue

Assigned VAT - The 2016 Fiscal Framework agreed that VAT assignment will be implemented following agreement between the two governments on a suitable assignment methodology.

The assignment of VAT will be based on a methodology that will estimate expenditure in Scotland on goods and services that are liable for VAT. As outlined in the updated 2023 agreement, once completed and agreed by officials, the assignment methodology and operating arrangements will be presented for joint ministerial sign-off at a future meeting of the Joint Exchequer Committee (JEC). The JEC will also agree arrangements for production of VAT revenue forecasts and a suitable point for the commencement of VAT assignment.

23. Information relating to Air Passenger Duty Tax, Aggregates Levy and Assigned VAT will be included in future Outturn Reports, following their implementation.