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#ScotBudget: Income tax rates frozen and business rates reduced

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Derek MacKay
Derek MacKay

Finance Secretary Derek Mackay yesterday announced a freeze in the basic rate of income tax and a reduction in the business rates poundage by 3.7 per cent.

Mr Mackay, setting out the Scottish Government’s Budget for 2017/18, said his tax policies would protect households incomes and support jobs.

However, he faced criticism for freezing the higher rate payment threshold at £43,430 after April 2017, whereas it will increase to £45,000 in the rest of the UK. The decision means Scottish taxpayers earning more than £45,000 will pay £314 more in income tax next year than someone in the rest of the UK, and the additional tax liability will rise to £690 by 2020/21.

The full list of headline announcements yesterday were:

  • The basic rate of income tax will be frozen at 20 per cent

  • The higher rate of income tax will be frozen at 40 per cent

  • The higher rate payment threshold will be frozen in real-terms at £43,430

  • The additional rate of income tax will remain at 45 per cent and the threshold will be unchanged

  • 100,000 properties will be exempt from business rates under the small business bonus scheme by increasing the 100 per cent relief threshold to £15,000

  • The overall business rates poundage – the core tax rate that applies to the rateable value of business properties – will be cut by 3.7 per cent to 46.6p.

  • The threshold for the large business supplement will be increased to £51,000 restricting liability to the very largest businesses and excluding 8,000 business properties

  • The residential and non-residential rates and bands for Land and Buildings Transaction Tax (LBTT) will remain unchanged

  • The Standard Rate of Scottish Landfill Tax (SLfT) will be increased to £86.10 per tonne and the Lower Rate of SLfT to £2.70 per tonne in line with RPI inflation and landfill charges in the rest of the UK.

    • Mr Mackay described the tax plans as “providing greater economic security, supporting jobs and creating opportunity”.

    He added: “Let me be clear, I will not pass the costs of UK austerity on to the household budgets of the lowest income taxpayers.

    “I will protect low and middle income taxpayers at a time of rising inflation by freezing the basic rate of income tax.

    “However, we cannot accept that at this time of austerity top earners should benefit from an inflation-busting tax cut. So I will limit the increase in the Higher Rate Threshold to inflation and not give a substantial real-terms tax cut to the top 10% of income earners.

    “The higher rate threshold will be set at £43,430 and, while I sympathise with those who have argued for an increase to the additional rate, I have had to balance that with the risk to our economy and am maintaining the current rate.

    “This Government’s approach is the right thing to do, for our economy, for jobs and our public services.”

    Industry bodies have welcomed the budget, while noting few major announcements in the area of taxation.

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