The Treasury announced that the Scottish Government will receive £545m of additional funding as a result of the Autumn Statement. Despite this, Scotland’s Deputy First Minister has said she was forced to make “exceptionally difficult decisions” as she revealed the government has had to make £680m in savings from this year’s budget.

Martin Bell and James Paterson, tax partners at BDO in Scotland, have analysed the Autumn Statement’s implications for Scottish taxpayers and offered insights into the potential directions of the Scottish Budget.

Martin Bell

Mr Bell points out that National Insurance, a non-devolved area, will see reductions from January 2024, benefiting Scottish workers. The increase in the National Living Wage, especially significant for those aged 21 and over with the rate rising to £11.44 per hour from April, will impact around 200,000 Scottish workers. However, the majority of Scottish employees already earn above this threshold.

“This may therefore lead to calls from higher earning employees for wage increases,” said Mr Bell.

Scottish companies will also benefit from enhanced tax relief for capital expenditures, as corporation tax remains a non-devolved matter. The Scottish whisky industry, significant to Scotland’s economy, has welcomed the freeze in spirit duty rates until August 2024.

In terms of income tax, no changes were announced by the Chancellor, leaving room for the Scottish government to adjust rates and bands, a devolved matter. Mr Bell suggests that the Scottish Finance Minister might maintain or even increase Scottish income tax rates, using the National Insurance reduction as a rationale.

Property transfer tax, another devolved tax with the Land & Buildings Transaction Tax (LBTT) in Scotland, is unlikely to see changes according to Mr Paterson. The LBTT currently places a higher cost on property purchases in Scotland compared to England, especially for second homes. Adjusting these rates could risk reducing LBTT revenue, given the current economic climate.

Regarding business rates, the Scottish government, which sets its own rates administered by local councils, is anticipated to follow the UK government’s lead in freezing these rates.

Finally, Mr Paterson expects some disability benefits, which have been under Scottish control since 2020, will see their future rates determined in the upcoming Scottish Budget.