Fiscal framework outturn report: 2024

4. Fully Devolved Taxes

34. This section focuses on the operation of the two fully devolved taxes (LBTT and SLfT). It sets out provisional outturn for 2023-24, forecasts for 2024-25 onwards along with the provisional reconciliations required for the 2025-26 Budget. Though this report uses provisional 2023-24 outturn revenue for the fully devolved taxes, the final revenue data will be published as part of Revenue Scotland’s Annual Report and Accounts. HMRC outturn data for Stamp Duty Land Tax and Landfill Tax, which are used to calculate the BGAs, are considered final.

35. Revenue Scotland manages and collects LBTT and SLfT and these revenue streams feed into the Scottish Budget as they are collected. This means reconciliations for revenue are not necessary for these taxes. The Scottish Government manages any variance between forecast and actual revenues as part of its in-year budget management process.

36. However, the BGAs for these taxes do undergo reconciliations and are reconciled in two stages. The first stage is an in-year reconciliation, which normally takes place within the same financial year, on the basis of updated OBR forecasts produced for the UK autumn fiscal event. Outturn data from HMRC becomes available in the autumn roughly midway through the following financial year. Using these outturn figures, a final reconciliation is applied to the Block Grant in the financial year two years after the original BGA was applied.

Land and Buildings Transaction Tax

37. Table 3 shows the provisional net effect on the Scottish Budget for LBTT for 2023-24, and compares outturn to forecasts.

*2023-24 LBTT Provisional revenue outturn excludes penalties and accounting adjustments applied by Revenue Scotland

38. Table 3 shows that the difference between the BGA used to underpin the Scottish Budget 2023-24 (-£517.0 million) and the provisional outturn BGA (-£524.5 million) is negative £7.4 million. As shown in Table 4, £16.2 million was deducted as an in-year reconciliation in 2023-24 and a further provisional outturn reconciliation of positive £8.7 million is required. The net effect of the in-year reconciliation and the provisional outturn reconciliation equates to the negative £7.4 million referenced above.

Table 4: LBTT 2023-24 BGA Reconciliation (£ million)

Forecast BGA - Scottish Budget 2023-24 (Dec 22): -517.0

Forecast BGA - UK Budget 2024 (Nov 23): -533.2

In-year reconciliation applied to 2023-24 Block Grant: -16.2

Provisional outturn BGA (Sep 24): -524.5

Provisional reconciliation applied to 2024-25 Block Grant: 8.7

39. There were two policy decisions made in the Scottish Budget 2023-24 regarding LBTT. The first was to maintain all of the main rates and bands of residential and non-residential LBTT at 2022-23 levels. The second was to raise the rate of the Additional Dwelling Supplement (ADS), which applies to the purchase of (for example) second homes, holiday homes or rental properties, from 4% to 6%. This change took place with immediate near effect after the Budget on 16 December 2022 so affected LBTT outturn in 2022-23 as well as 2023-24.

40. Total LBTT revenues fell by 7% in 2023-24 relative to 2022-23 and the number of residential property sales subject to LBTT fell by 8% in 2023-24. In terms of the net position in 2023-24, this negative impact was however more than offset by a decline in SDLT receipts including as a result of a sharper downturn in English/Northern Irish property markets where (for example) residential transactions fell by 18% in 2023-24. Overall, a relatively shallower market downturn in Scotland contributed to an increase in the LBTT net position by £109.1m (72%) compared to 2022-23.

41. Table 5 compares the LBTT forecasts used to set the Scottish Budget 2024-25 with the latest forecasts of revenue and BGA for 2024-25. There have been no updated OBR forecasts since the UK Spring Budget in March 2024 nor any further SFC forecasts since December 2023.

42. The change in the forecasts for the BGA in Table 5 reflect the difference between the BGA used in the Budget Act 2024 and the forecast of the BGA provided at the UK Spring Budget 2024. The actual in-year reconciliation will be based on updated BGAs forecasts provided alongside the next set of OBR forecasts which will follow later this year.

Scottish Landfill Tax

43. Table 6 shows the net effect on the Scottish Budget for Scottish Landfill Tax (SLfT) for 2023-24, and compares outturn to forecasts.

*2023-24 SLfT Provisional revenue outturn excludes penalties and accounting adjustments applied by Revenue Scotland

44. Table 6 shows that the difference between the BGA used to underpin the Scottish Budget 2023-24 (-£98.6 million) and the provisional outturn BGA (-£74.1 million) is positive £24.5 million. As shown in Table 7, £16.9 million was added as an in-year reconciliation in 2023-24 and a further provisional outturn reconciliation of positive £7.6 million is required. The net effect of the in-year reconciliation and the final reconciliation equates to the positive £24.5 million referenced above.

Table 7: SLfT 2023-24 BGA Reconciliation (£ million)

Forecast BGA - Scottish Budget 2023-24 (Dec 22): -98.6

Forecast BGA - UK Budget 2024 (Nov 23): -81.8

In-year reconciliation applied to 2023-24 Block Grant: +16.9

Provisional outturn BGA (Sep 24): -74.1

Provisional reconciliation applied to 2024-25 Block Grant: +7.6

45. Both the standard and lower rates of SLfT were increased in Scottish Budget 2023-24, maintaining consistency with rates in other parts of the UK. In 2024-25, SLfT revenue fell by 38%, primarily due to the amount of standard rate waste sent to landfill decreasing. This was in line with the tax’s policy intent and reflected in particular the increasing availability and use of alternative waste treatments (e.g. incineration) as local authorities prepare for the end-2025 legislative ban on the landfilling of biodegradable waste from 31 December 2025.

46. Table 8 compares the forecasts used to set the Scottish Budget 2024-25 with the latest forecasts of revenue and BGA for 2024-25 SLfT. There have been no updated OBR forecasts since the UK Spring Budget in March 2024 nor any further SFC forecasts since December 2023.

47. The change in the forecasts for the BGA for SLfT reflect the difference between the BGA used in the Budget Act 2024, and the forecast of the BGA provided at the UK Spring Budget in March 2024. The actual in-year reconciliation will be based on updated BGAs forecasts provided alongside the next set of OBR forecasts later this year.