Small reduction in income tax and extension of business rates relief in Scottish budget
Income tax will go down across Scotland from April, finance secretary Kate Forbes has announced, as she revealed the details of this year’s draft budget.
The thresholds for the starter, basic and higher rate bands of income tax will increase by inflation, while the threshold for the top rate will be frozen at £150,000, meaning everyone pays less if they continue to earn the same amount.
Public sector workers earning up to £25,000 will receive at least a three per cent pay increase, while there will be a one per cent rise for those earning over that amount, capped at £800 above £80,000.
Businesses will also benefit, with the current 100 per cent business rates relief for properties in the retail, hospitality, leisure and aviation sectors continuing for at least the first three months of the new financial year and business rates poundage dropping from 49.8p to 49p in the pound, which Forbes said would save ratepayers £120m.
The Strategic Framework Business Fund, which supports businesses that are required to close due to COVID restrictions, will also continue into the next financial year.
The Scottish Retail Consortium said the extension of business rates relief provided a “breathing space” as the sector hopes to emerge from lockdown.
However, the Federation of Small Businesses said this “only goes so far”, calling for an extension to the full rates relief for small businesses for the whole year to allow firms to get back on their feet, and for a continued exemption for premises that cannot be used.
“We need to avoid any scenario where businesses face property tax demands on premises the government has barred them from using,” it said.
The main focus of the budget announcement was on core spending rather than new initiatives.
Heath and sport will receive over £16bn next year, an increase of £800,000, which includes £1.9bn for primary healthcare and more than £1.1bn for mental health.
In addition, there will be a further £869m dedicated to tackling COVID.
Local government will receive a total of £11.6bn in 2021-22.
This represents a £335.6m increase in core revenue funding, including £90m to compensate local authorities that choose to freeze council tax, plus £259m in one-off funding, but it falls well below the £12.8bn funding councils had asked for.
Other announcements included £1.3bn for the Scottish Police Authority, including an uplift of £60m to the resource budget, which Forbes said would eliminate its deficit, £1.6 billion for rail and bus services and £711.6m for affordable housing.
Forbes said: “This budget is being delivered in exceptional circumstances as we continue to battle a pandemic that has shaken our society and economy to the core, and as we face the harmful impacts of Brexit.
“It promotes innovation and reform, new beginnings, new directions.
“And while it continues to target support in the immediate term, it also tracks a course over the next year to build a fairer, stronger and greener country.
“To help drive our green economic recovery I am providing the stability and certainty that businesses have asked for through the most competitive reliefs packages in the UK.
“There are innovative measures to promote sustainable growth and we are investing more than £1 billion in jobs and training.
“The budget sets out a distinctive Scottish pay policy that again supports the lowest paid, charting a different course to the ill-judged pay freeze announced by the UK Government.
“It also bolsters our health service, delivers more affordable homes, provides additional childcare places and helps young people into work.
“Throughout these dark times we have never given up hope.
“This budget seeks to build on that hope and, by focusing on how we rebuild and renew our country, make the light at the end of the tunnel shine that bit brighter.”