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Scottish Budget 2022/23 Summary

Kate Forbes, Scotland’s Cabinet Secretary for Finance and the Economy, presented the 2022/23 Scottish Budget on Thursday 9 December.

Ms Forbes said: “This is a transitional budget, as people, businesses and services get back on their feet. It focuses on tackling the climate emergency, reducing inequalities and supporting economic recovery.”

We have highlighted the points we believe are most relevant for our clients below.  Should you want to read the full budget report it can be found here on the gov.scot website.

PERSONAL TAXES

Scottish Income Tax:

  • the UK Personal Allowance will be £12,570 for 2022-23
  • income tax rates will remain unchanged next year but the thresholds at which it is paid will increase for lower earners
  • the Starter and Basic Rate income thresholds will increase in line with CPI inflation (3.1%)
  • the Higher Rate threshold will be frozen in 2022-23. It remains at 41% for earnings between £43,662 and£150,000
  • the Top Rate tax (46%) threshold will also be frozen at £150,000.
Bands Band name Rate
Over £12,570* – £14,732 Starter Rate 19%
Over £14,732 – £25,688 Scottish Basic Rate 20%
Over £25,688 – £43,662 Intermediate Rate 21%
Over £43,662 – £150,000** Higher Rate 41%
Over £150,000** Top Rate 46%

* assumes individuals are in receipt of the Standard UK Personal Allowance.
** those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

  • the land and buildings transaction tax rates and bands will be maintained at their current level
  • Scottish landfill tax – standard and lower rates will be increased
BUSINESS TAXES

Business rates:

  • over the past two years the retail, hospitality, leisure and aviation sectors have had 100% rates relief to deal with effects of the Covid pandemic. This ended in July for businesses in England but will continue until April next year in Scotland
  • there will be 50% rates relief for the first three months of 2022-23, capped at £27,500 per ratepayer, to prevent a “cliff edge”
  • the Non-Domestic Rates poundage will be 49.8p, a below inflation rise
  • small businesses, with a rateable value of less than £15,000 will continue to pay no rates for the entirety of next year, irrespective of what sector they are in.
OTHER BUDGET HIGHLIGHTS

Public sector pay:

  • minimum wage rises to £10.50 an hour for social care staff and all people covered by the Public Sector pay policy
  • the pay policy for next year focuses on those on low incomes, guaranteeing an inflationary uplift of at least £775 to those earning up to £25,000, £700 to those earning between £25,000 and £40,000, and £500 to those earning above £40,000.

Council tax freeze ends:

  • last year’s freeze on council tax rises will not continue
  • for 2022-23, councils will have complete flexibility to set the rate they want for the first time since the SNP came to power in 2007. Local authorities will be able to increase council tax by as much as they want next year,

NHS:

  • in total, the Budget provides funding of £18bn for Health and Social Care, including £12.9bn for health boards
  • the overall package provides £1.2bn for mental health. There is a commitment that 10% of all front-line NHS spend goes to mental health by the end of the parliament in 2026.

Social care:

  • more than £4bn will paid out in Scottish social security and welfare payments, including £1.95bn to start delivery of the Adult Disability Payment in 2022-23
  • it also includes £197m to double the Scottish Child Payment to £20 from April 2022 for families in poverty with children under six – and extend it to under 16s by the end of 2022.

Economic forecasts:

The Scottish Fiscal Commission forecasts the level of long-term economic damage to the Scottish economy from Covid-19 is about 2%, similar to the OBR’s forecast for the UK.  This is significantly less than the expected economic impact of Brexit, which the OBR forecasts as a 4% long-term reduction.

The Fiscal Commission forecasts the economy will recover to pre-pandemic levels by April-June 2022, almost two years earlier than forecast at the previous Scottish Budget in January.

 

As always, the information outlined above is for general guidance purposes only. We appreciate that every individual and business has different circumstances and you should always seek appropriate professional advice before you act on any of the information provided.

If you would like more information or advice on the budget or require wider business or planning guidance please do get in touch with your GWA Partner. Alternatively, if you are not a GWA client please do contact us to arrange your free initial meeting.

 

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