Scottish Budget Update

Kate Forbes, Scotland’s Finance Secretary set out budget plans on 28 January at the Scottish budget. She told MSPs that this was a time for “stability, certainty and targeted support”. Here are some key areas we’d like to highlight to you.

Income Tax

The Finance Secretary announced Income Tax rates will remain unchanged and the starter and basic rate bands, as well as the higher rate threshold, will increase in line with CPI inflation (0.5%). The one exception is the top rate threshold will remain frozen in cash terms at £150,000.

As a result, Scottish taxpayers should be paying slightly less Income Tax in 2021-22 than in 2020-21, based on their current income.

Here are the Rates and Bands sourced from the Scottish Government

Table 2.01: Scottish Income Tax Policy Proposals 2021-22
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 in receipt of the Standard UK Personal Allowance

** The Top Rate remains at 2020-21 level. Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000

Personal Allowance:

Scottish Government has taken the decision not to include a change to the ‘effective Personal Allowance’ of £12,750 as part of the 2021-22 Income Tax proposal.

Here is a summary of key points:

Local Rates Freeze

Councils have been offered an incentive to freeze local rates to protect households.

Rate relief for retail, hospitality and leisure

Non-domestic rates relief for retail, hospitality and leisure businesses will be extended by at least another three months. The situations will continue to be monitored and rate relief reviewed following UK budget in March and once again after the three months.


The temporary tax cut on transactions sales for house buyers will end on 1 April. The starting point for land and buildings transaction tax (LBTT) was raised from £145,000 to £250,000 and will revert back in April.  (The Stamp duty potential extension is for properties in England and Wales.)

Other spending Plans include:

  • £16bn for health services,
  • Extra £869m to tackle Covid-19
  • £11.6bn in total for local government
  • £3.6bn for social security
  • £1.1bn for mental health services
  • additional £50m for the “national mission” to tackle drug deaths
  • £1.6bn for bus and rail services
  • £800m for agricultural support

If you require any support on tax related matters please contact our tax expert Wendy McBride at