Scottish Budget 2022 to 2023: Your Scotland, Your Finances - guide

Each year the Scottish Government publishes a balanced Budget that sets out the spending plans for the new financial year. The annual Scottish Budget covers each financial year, which runs from 1 April until 30 March, with annual spending amounting to over £50 billion. 

The Scottish Budget for 2022 to 2023 has been set at £56.5 billion and a detailed breakdown of spending plans is available on the Scottish Government web site. 

This Budget comes at a critical point for Scotland. It seeks to balance the immediate pressures of our continued recovery from the pandemic along with supporting our three strategic priorities –

• tackling inequalities
• a just transition to Net Zero and 
• investing in our economic and public service recovery

This is the first Budget developed and delivered in partnership with the Scottish Green Party, delivering on commitments made as part of the Bute House Agreement. It is also the first of the new Parliament (session 6).

Here is a summary of how the Scottish Budget is funded, and the current spending plans for the year ahead.

How the Scottish Budget is funded

The Scottish Budget is funded mainly through annual funding from the UK Government, known as the Scottish block grant, and devolved tax revenues. The block grant is calculated with reference to changes in spending on equivalent public services in England. The Scottish Budget is allocated a population share of changes in funding using the Barnett formula, which is added to baseline funding to give the revised Scottish block grant for each year. This funding is added to the devolved tax income raised in Scotland to fund spending on devolved public services in Scotland.

There are rules that govern how Scotland receives and manages its funding and these are set out in the UK Government’s Statement of Funding Policy and in the Fiscal Framework. The Fiscal Framework is an agreement between the Scottish and United Kingdom governments, which details how Scotland must manage its funding. This includes limits on borrowing powers and on the use of a reserve to transfer funding between financial years. The agreement also details the arrangements for the adjustments made to the Scottish block grant, to account for the devolution of certain tax and social security powers – these are called ‘Block Grant Adjustments’. The Fiscal Framework agreement is currently under review. You can read more on the Fiscal Framework. 

What the Scottish Budget funds

Ultimately the Scottish Government is accountable to the Scottish Parliament and to the people of Scotland for its use of public money. Each year, Scottish Ministers develop spending proposals ahead of the new financial year. These proposals are published and presented to the Scottish Parliament with draft legislation (the annual Budget Bill) for scrutiny and approval by the Parliament.  

Devolution allows the Scottish Parliament to decide how much money to spend on different policy areas, including schools, hospitals, policing, certain social security benefits, the economy, climate change and the environment. Delivery in these areas involves a range of partners including local government, public bodies and the third sector.

The UK Government is responsible for spending on areas that are reserved, including immigration, certain social security benefits, foreign policy and defence. 

Scottish tax – raised in Scotland, spent in Scotland

The Scottish Parliament has the power to set the rates and bands of Income Tax paid by Scottish taxpayers on non-savings and non-dividend income. This is income earned through employment, self-employment, pensions or property.

Scottish Income Tax is collected by HMRC and the money raised through the tax is then transferred to the Scottish Government.

There are three taxes that are fully devolved and are set by the Scottish Parliament. These are:

• Non-Domestic Rates (NDR), often referred to as ‘business rates’, is a tax paid on non-residential property. Current NDR rates
• Land and Buildings Transaction Tax (LBTT) is a tax payable on land and property transactions in Scotland over a certain value. Current LBTT rates
• Scottish Landfill Tax (SLfT) is a tax on the disposal of waste to landfill. The tax provides a financial incentive to reduce the amount of waste going to landfill. Current SLfT rates

Our animated video, ‘Raised in Scotland. Spent in Scotland’ summarises how tax revenues contribute to the Scottish Budget.

Approach to taxation

Our approach to taxation is founded upon engagement with stakeholders. This allows us to understand and consider a wide range of views, including from the general public, when designing tax policy. 

Our progressive tax policies are designed to support those on lower and middle incomes, with the majority of taxpayers in Scotland continuing to pay less income tax than they would if they lived elsewhere in the UK. 

Our decisions on tax policies will raise the revenues needed to invest in vital public services, including the NHS and the police, and support Scotland’s economy.
 
Scottish Income Tax rates and bands for 2022 to 2023

Bands	Band name	Rate
£12,570* - £14,732	Starter Rate	19%
£14,732 - £25,688	Scottish Basic Rate	20%
£25,688 - £43,662	Intermediate Rate	21%
£43,662 - £150,000**	Higher Rate	41%
Over £150,000**	Top Rate	46%

* assumes individuals are in receipt of the Standard UK Personal Allowance.
** Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

Total spending plans for 2022 to 2023 - at a glance

Table 1 below shows the approximate planned expenditure for each group of policy areas (known as portfolios) across the Scottish Government. Each portfolio supports Scottish Ministers in the delivery of our Programme for Government, and national outcomes for Scotland as set out in the National Performance Framework. 

Scottish Government portfolio	Total expenditure*
Health and social care	£18 billion
Social justice, housing and local government	£16.8 billion
Finance and economy	£18.2 billion
Net Zero, energy and transport	£14.4 billion
Education and skills	£4.1 billion
Justice and veterans	£3.1 billion
Rural affairs and islands	£1 billion
Constitution, external affairs and culture	£400 million
Crown Office and Procurator Fiscal Service	£200 million
Deputy First Minister and COVID recovery	£40 million

Table 1 - Figures are rounded*

** The Scottish Budget also includes funding for the Scottish Parliament and for Audit Scotland, which total around £100 million.