Scottish Budget 2021-22: Highlights

19th Feb 2021
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On the 28th January 2021, Finance Secretary Kate Forbes delivered the Scottish Budget for 2021-22. Here we’ve covered the highlights.

Supporting jobs, skills and the post-pandemic economy

On the 28th January 2021, Finance Secretary Kate Forbes delivered the Scottish Budget for 2021-22. The Budget outlines the Scottish Government’s plans around taxation and spending for the year ahead, including £1.1 billion of support towards jobs and skills post-pandemic.

The last Budget was held in February 2020, and of course much has changed between then and now. Over the last twelve months, the UK Treasury has offered an additional £8.6 billion to Holyrood to assist in supporting businesses and individuals through the coronavirus pandemic. We already know that an extra £1.3 billion has been added to the block grant for the financial year to come, and this figure could well grow when UK Chancellor Rishi Sunak unveils the UK Spring Budget on the 3rd March.

Twin impacts of coronavirus and Brexit

In her Budget speech, Forbes underlined the huge economic impacts of both the COVID-19 restrictions and the UK’s departure from the EU. She also made clear her intentions to build back a stronger, fairer post-pandemic society and a greener economy.

The Scottish Budget focused on three key priorities:

  • The creations of jobs
  • Overcoming inequality
  • Responding to the economic and health consequences of the coronavirus pandemic

Here we’ve looked at the highlights and what they mean for businesses and individuals in Scotland.

Income tax thresholds

No changes were made in the Budget to existing income tax bands in Scotland. Additionally, Scottish taxpayers can expect to pay less on their earnings this year due to an increase in inflation.

The UK Spring Budget in March is set to include planned increases to personal allowance from £12,500 to £12,750. If this does take place, Scottish workers will enjoy an additional boost.

For clarity, the income tax thresholds and rates in Scotland for 2021-22 as therefore as follows:

Band

Income range

Rate

Starter rate

Over £12,570 - £14,667

19%

Basic rate

Over £14,667 - £25,296

20%

Intermediate rate

Over £25,296 - £43,662

21%

Higher rate

Over £43,662 - £150,000*

41%

Top rate

Over £150,000**

46%

* Assumes individuals are subject to the Standard UK Personal Allowance

** The Top Rate stays at the 2020-21 level. Those earning over £100,000 will have their Personal Allowance cut by £1 for every £2 earned over £100,000

Land and Buildings Transaction Tax (LBTT)

Due to the COVID-19 pandemic, the residential 0% rate band was scrapped in July 2020 in an attempt to support the ailing property market. Confirmation has now been received that indeed the nil rate band will therefore return to £145,000 from the 1st April.  

There’s good news however for first time buyers who will still be able to benefit from First Time Buyers Relief. The relief saves buyers around £600 and as many as 80% of first time buyers can access the scheme.

Finally, Additional Dwelling Supplement (ADS) will be held at 4%, although this is expected to be reviewed over the next twelve months.

Continuation of full business rates relief

Despite uncertainty from the UK government on their plans for business rate relief in England and Wales, the 100% business rates relief will continue in Scotland for the first three months of 2021/22. Forbes has also called on the UK government to extend the rates relief beyond the current three months.

Funding for council tax freezes

In previous years, Scottish councils were allowed to increase their council tax levels by as much as 3% if they so wished. However, this year £90 million is being provided to councils that are opting to freeze council tax bills for 2021-22. Equivalent to a 3% rise, it’s hoped the measure will take some pressure off private households whilst still supporting councils in funding essential services.

Public sector pay

The real living wage for public sector employees in Scotland is being increased to £9.50, translating to a 3% increase for those earning up to £25,000 a year. Those earning above £25,000 will see a 1% increase, capped at £800 a year. At present, the public sector pay freeze in England and Wales is expected to remain.

Digital connectivity

The Budget also includes £100 million set aside to support digital connectivity, including improved 4G and 5G infrastructure. The aim is to support Scotland in its position as a world class hub for tech start-ups.

When will these measures come into effect?

Assuming the SNP’s draft Budget proposals receive full approval, they will come into effect from the 6th April 2021. However, the SNP is a minority party which means it needs the support of at least one other political party for the Budget to be approved - each party will devise a list of its own demands before it agrees on a deal.

For the last four Budgets, the SNP has successfully made a deal with the Green Party, last year agreeing a free bus travel scheme for people aged under 19. The new tax year starts in just over a month and half’s time, so a deal must be agreed soon - watch this space.

See the full Scottish Budget 2021-22 online

We’ve covered the main highlights of the Budget here but more in-depth information can be found on the Gov.scot website.

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