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Scottish Autumn Budget 2021: what taxpayers in Scotland need to know

Changes are planned for income tax, business rates and council tax

Scottish Autumn Budget 2021: what taxpayers in Scotland need to know

Some income tax thresholds will rise in line with inflation from April, and the Scottish Child Payment will be doubled, under proposals announced today in the Scottish Budget.

Other changes include proposed public sector pay increases and the lifting of the council tax freeze.

SNP public finance minister Kate Forbes announced the plans today, but they will need to be approved by Scottish Parliament and receive royal assent before they can come into force.

Here, Which? explains the proposed changes in the Scottish Budget for the 2022-23 tax year, and how they could affect your finances.


Scottish income tax rates for 2022-23

The table below shows the proposed Scottish income tax rates and thresholds for 2022-23, compared to 2021-22.

In today’s Budget speech, it was announced that Scottish income tax rates would remain the same, but the starter, basic and intermediate rate thresholds would rise in line with inflation.

Higher and top-rate thresholds will remain the same.

2021-22 tax year 2022-23 tax year
Tax band Income Tax rate Income Tax rate
Personal allowance £0-£12,570 0% £0-£12,570 0%
Starter rate £12,571-£14,667 19% £12,571-£14,732 19%
Basic rate £14,668-£25,296 20% £14,733-£25,688 20%
Intermediate rate £25,297-£43,662 21% £25,689-£43,662 21%
Higher rate £43,663-£150,000 41% £43,663-£150,000 41%
Top rate More than £150,000 46% More than £150,000 46%

Those earning more than £100,000 will see their personal allowance reduced by £1 for every £2 they earn over the threshold, meaning that anyone who earns more than £125,140 will pay tax on all income they earn.

What do the changes mean for you?

Forbes said the majority of taxpayers will continue to pay less tax in Scotland than if they lived elsewhere in the UK, but the people who earn more will pay more.

Freezing the higher-income tax thresholds means more people will fall into the higher tax bands if they receive salary rises.

According to Budget documents, 46% of Scottish households will pay less tax, 30% will pay the same amount and 24% will pay more tax in 2022-23.
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Scottish Child Payment to double

From April 2022, the Scottish Child Payment is set to double from £10 to £20 per week.

This payment, which was first introduced in February 2021 in a bid to tackle child poverty, supports low-income families with children under the age of six.

Forbes said more than 105,000 children will immediately benefit from this increased support, and the payments are due to be rolled out to children under the age of 16 by December 2022.

Proposed housing changes

Today’s Budget mentioned a number of things of note in the housing sector.

LBTT to remain the same

Residential rates and bands are not set to change.

This includes First-time Buyer Relief, which will continue to be available for new house buyers. This allows first-time buyers to reduce the LBTT they pay by up to £600, as it effectively raises the nil-rate band from £145,000 to £175,000.

One to watch: additional dwelling supplement rate

Forbes mentioned the plan to consult on the additional dwelling supplement rate in her last Budget in January 2021. This is a supplementary LBTT charge of 4% levied on those who purchase buy-to-let properties or second homes over the value of £40,000.

In today’s Budget, she said the Scottish Government will soon launch a call for evidence and views on the additional dwelling supplement. This won’t be looking at whether or not it should continue, but rather its operation and any stakeholder and taxpayer concerns.

Affordable housing

The Budget speech mentioned £831m is proposed to be spent on the provision of affordable, energy-efficient homes. This is part of the long-term aim to provide 110,000 affordable homes by 2032.

Council tax no longer frozen

In the 2021-22 Budget, funding was provided to all Scottish local authorities equal to a 3% rise – as long as they froze council tax increases for residents.

This will not happen in 2022-23. According to Budget documents, Scottish councils are being given ‘complete flexibility’ to set a council tax rate that is appropriate for their local authority area.

It also says councils should take full account of local needs, while weighing up the impacts their decisions will have on household budgets.

This means residents could see large increases to their council tax bills from April 2022.

Business rates reduction

The Budget proposes to ensure that at least 95% of Scottish non-domestic properties will be liable to pay lower business rates than anywhere else in the UK.

The basic property rate will increase at a rate below inflation, to 49.8p – an increase of 0.8p, maintaining the lowest poundage in the UK.

The intermediate property rate will be charged at 51.1p on properties with a rateable value between £51,001 and £95,000. The higher property rate will be charged at 52.4p for properties with a rateable value of more than £95,000.

Public sector pay increases

The Budget proposes that in 2022-23 a new guaranteed wage floor will be set at £10.50 per hour, going beyond the current real living wage rate of £9.90.

It also proposes that public sector workers who earn £25,000 or less will see a guaranteed cash underpin of £775; those who earn £25,000-£40,000 will see a basic pay increase of up to £700, and there will be a cash uplift of up to £500 for those who earn more than £40,000.

What must happen for the changes to take place?

If the SNP’s draft Budget proposals are approved, they will come into force on 6 April 2022.

As the SNP is a minority party, it needs the support of at least one other political party in order for the Budget to pass. Each party usually draws up a list of its own demands before agreeing on a deal.

Forbes said today’s Budget was developed in cooperation with the Scottish Greens; the SNP has struck a deal with the Green Party for the last five Budgets.

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