Scottish Budget 2023/24 Summary

Information as of 15 December 2022

After an unexpected delay, John Swinney yesterday outlined the Scottish Budget plans for 2023/24 which included the freezing of tax thresholds and an increase in income tax.

The Deputy First Minister stated that the overall planned increase in taxes would raise £1bn over the next tax year and the increases in the higher and top rate bands of income tax would be ring-fenced for health and social care.

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 2023-24
• the starter, basic and intermediate rates and associated income thresholds will remain the same for 2023/24 as in 2022/23
• the higher rate will increase by 1% (up to 42%) and will apply to the lower threshold of earnings between £43,662 and £125,140
• the top rate tax will also increase by 1% ( up to 47%) on income above £125,140.

* assumes individuals are in receipt of the Standard UK Personal Allowance.

In summary, the impact of these changes are**:

• Scots with earnings under £27,850 will pay a maximum of £21.62 less tax than someone in the rest of the UK next year
• those earning £50,000 next year will pay an extra £63.38 in tax compared with this year. They will pay £1,552.48 per year more on this level of income than someone on the same salary in other parts of the UK from April
• those earning £150,000 (the previous top rate threshold) will pay an additional £2,432.08 compared to this year. They will pay an extra £3,857.88 compared with someone earning the same salary elsewhere in the UK.

** figures taken from Chartered Institute of Taxation

Housing:

• the land and buildings transaction tax rates and bands will be maintained at their current level
• second home owners will see a 2% increase in the Additional Dwelling Supplement (ADS), from 4% to 6% as of 16 December 2022. The legislation will not affect any land transaction where contracts have been entered into prior to 16 December 2022.

BUSINESS TAXES/INCENTIVES

• the Basic Property Rate of Non-Domestic Rates will be frozen at its current level of 49.8%
• businesses to be encouraged to invest in renewable energy through exemptions from their Non-Domestic rates liability by purchasing qualifying plant and machinery.

OTHER BUDGET HIGHLIGHTS

• a pledge to increase benefits under the control of the Scottish parliament by September 2022 rate of inflation ie. 10.1%
• £20m originally budgeted for indyref2 has been switched to Fuel Insecurity Fund
• the freeze on council tax increases will end, providing each council full flexibility to set their own rates.

Economic forecasts:

The Scottish Fiscal Commission has published a new set of forecasts alongside John Swinney’s budget. The body is forecasting a “shallow recession” in the coming year, with the economy not recovering to pre-pandemic levels until 2025. It also says high inflation – predicted to peak at 11.1% – has contributed to “the greatest fall in the real value of disposable income per person since records began in 1998”.

The group also expects a fall in house prices over the next two years due to rising interest rates, with prices not recovering to 2022 levels until 2027.

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 planning or financial 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.