Scottish Budget 2021/2022

The Scottish budget was delivered on 28 January 2021 by Kate Forbes outlining the tax changes to be made for the 2021/2022 tax year.

Income Tax

As expected, due to the continuing pandemic, there were no changes to the Scottish Rates of Income Tax for 2021/2022.

While the income tax rates will remain the same, the tax bandings have been given an inflationary increase of 0.5%, excluding the top rate which will continue to apply on income over £150,000.  The rates and bands for 2021/2022, which apply to non-savings income (employment, self-employment and rental income) will be as follows:

Band	Banding	Tax 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 individual is in receipt of the standard UK personal allowance which will increase to £12,570 for 2021/2022 (£12,500 for 2020/2021). Personal allowances of those earning over £100,000 will continue to fall by £1 for every £2 earned over £100,000.

Land and Buildings Transaction Tax (LBTT)

In July 2020 it was announced the threshold for the nil rate band for residential LBTT was to be increased to £250,000 until 31 March 2021.

From 1 April 2021 the threshold will reduce back to £145,000 for all transactions excluding first time buyers. They will be able to claim first time buyer relief which in effect raises the nil rate band to £175,000, providing a tax reduction of £600.

The residential LBTT rates for 2021/2022 are as follows:

Band	Consideration	Rate
Nil Rate Band	Not more than £145,000	0%
First Tax Band	£145,001 – £250,000	2%
Second Tax Band	£250,001 – £325,000	5%
Third Tax Band	£325,001 – £750,000	10%
Fourth Tax Band	More than £750,001	12%

 

The Additional Dwelling supplement (ADS) remains unchanged at 4% on all relevant residential purchases above £40,000.

There have been calls to look at the timeframe in which your previous main residence is to be sold to reclaim the ADS, however this has been left at 18 months but the government realises this may need reform and is likely to look at this early in the next parliament.

The existing non-residential LBTT rates and bands for conveyances and leases remain unchanged.

Non-Domestic Rates (Business Rates)

The Property Rate (poundage) will be reduced back to the 2019/2020 rate of 49 pence (down from 49.8 pence).

The new rates for 2021/2022 are as follows:

Basic Property Rate	49p	Poundage
Intermediate Property Rate (rateable values between £51,001 and £95,000)	50.3p	Poundage + 1.3p
Higher Property Rate (rateable value above £95,000)	51.6p	Poundage + 2.6p

 

The Budget commits to extending the 100% relief available to the retail, hospitality, leisure and aviation sectors for at least the first 3 months of 2021/2022.

Day Nursery relief will be extended until at least 30 June 2023.

The information in this blog provides only an overview of Scottish Government guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed Scottish Government guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.