Scottish Budget: ICAS reaction

Scottish Parliament
By Charlotte Barbour, ICAS Director of Taxation

15 December 2016

Charlotte Barbour, Director of Taxation at ICAS, highlights the key tax outcomes of the Scottish budget.

Scotland’s Finance Secretary, Derek MacKay has taken a cautious line in his first budget with the new income tax powers, which will allow time for the new powers to bed in.

Higher-rate taxpayers

The budget proposals for the tax year beginning 6 April 2017 reflect the SNP manifesto – to limit the increase in the higher-rate threshold to £43,430 compared with the rest of the UK, where it will rise to £45,000.

This will cost those earning more than £45,000, £314 over the course of 2017/18 on their “non-savings, non-dividend income” income, in other words on income such as salaries, pensions, trading income and rentals.

With the ability to exercise the new tax powers granted in the Scotland Act 2016, and scope to set different bands or new rates, the Finance Secretary has taken the opportunity to start using these.

The intricacies of income tax

It is wise to be cautious at the outset.

As noted in the Smith Commission Report, income tax remains a shared tax so it is not easy for one jurisdiction to act in isolation.

There are a number of levers in the mix with income tax – some of which are in the control of the Scottish Government, the different rates and bands at which income tax is charged, and others which are not. Added to this, and not quantifiable at this stage, is the extent to which changed rates and bands could influence taxpayer behaviour.

Public understanding

We will continue to contribute to the public debate about the new tax powers. We believe that a five-year roadmap to set out the objectives of Scottish tax policy is vital: this should provide clarity of purpose and allow for measurement of outcomes against the objectives.

We also welcome the debates generated around the Scottish Budget and the new tax powers. The Smith Commission proposals were designed to encourage clarity and accountability for taxpayers: accountability can only come through public discussion and increased public understanding of tax.


  • Tax

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