Draft Scottish Budget 2020/21: what you need to know

Susie Walker

Susie Walker

Partner and Head of Tax and Brexit Team

The Minister for Public Finance and Digital Economy, Kate Forbes, delivered a Scottish Budget announcement with a focus on "fairness, collective wellbeing and climate change".

The Budget sets out the tax and spending plans for the year ahead and these proposals now need votes from opposition parties to pass the measures. The key tax announcements in the Scottish Budget included minimal changes to Scottish income tax bands for 2020/21 and a new charge for LBTT on certain leases that comes into effect from tomorrow (Friday 7 February) - to read more about the LBTT changes read Paul McGonigal's blog

What does this mean for Scottish taxpayers with varying taxable earnings?

We’ve set out what this means in practice for different earnings thresholds, in the table below:

Taxable earnings (£)2019/20 (£)2020/21 (£)Changes in tax payable (£)

We've pulled out the key announcements from the Draft Scottish Budget below, To read the Scottish Budget in full, visit the Scottish Government website here

Rates and Bands

In the 2018 Autumn Budget, the UK Government announced that the UK‑wide Personal Allowance would be frozen at £12,500 in 2020‑21. This policy announcement has formed the basis of the Scottish Fiscal Commission (SFC) assumptions and forecasts for income tax revenue, in line with the approach taken by the Office for Budget Responsibility (OBR). We expect this to be confirmed by the UK Government in their Budget on 11 March 2020. This table sets out the Scottish Government's proposed rates and bands for 2020‑21.

BandBand nameRate
£12,501* ‑ £14,585Starter Rate19%
£14,586 ‑ £25,158Scottish Basic Rate20%
£25,159 ‑ £43,430Intermediate Rate21%
£43,431 ‑ £150,000**Higher Rate41%
Above £150,000**Top Rate46%

*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.

Scottish Landfill Tax

Scottish Landfill Tax (SLfT) was introduced on 1 April 2015, replacing UK Landfill Tax. It is a tax on the disposal of waste to landfill, charged by weight on the basis of two rates - a standard rate, and a lower rate for less-polluting materials.

The Scottish Government proposes to increase both the standard rate of SLfT to £94.15 per tonne and the lower rate of SLfT to £3 per tonne in 2020‑21 to ensure consistency with planned Landfill Tax charges in the rest of the UK.

Non‑Domestic Rates

The Scottish Budget 2020-21 outlined the following in relation to non-domestic rates:

  • In 2020-21, properties with a rateable value (RV) above £95,000 will continue to be charged the Higher Property Rate (formerly the poundage plus the Large Business Supplement) of 2.6p plus the poundage;
  • properties with an RV of between £51,000 and £95,000 will now only be charged an additional 1.3p on rates on top of the standard poundage. The introduction of this Intermediate Property Rate will improve the progressivity of the system and reduce rates liabilities for around 9,500 medium-sized properties by 1.3p, or 3 per cent;
  • an extension of 100 per cent relief for Enterprise Areas to 31 March 2022;
  • an amendment to the reset period for Empty Property Relief from 6 weeks to 6 months, as recommended by the Barclay Review;
  • the introduction of a 70‑day requirement of actual letting for a self‑catering property in order to be considered non-domestic and liable for NDR rather than council tax, as recommended by the Barclay Review;
  • the introduction of a new 100 per cent relief for Reverse Vending Machines from 1 April 2020, which will assist retailers in the context of the Deposit Return Scheme and supporting efforts to tackle climate change; and
  • introducing a district heating relief guaranteed until 2032 in order to provide certainty to investors.

Other key points to note

The Scottish Budget 2020‑21 also maintains the following reliefs and schemes:

  • the Small Business Bonus Scheme, which has lifted over 111,000 properties out of rates altogether as at 31 May 2019;
  • the Business Growth Accelerator, which is unique in the UK and ensures that new build properties are not liable for rates until 12 months after first occupation and any rates bill rises due to improvements to or the expansion of existing properties will not take effect until 12 months after those changes are made to the property;
  • Transitional Relief, which caps annual rates bill increases at 12.5% in real terms for Aberdeen City and Aberdeenshire offices and all but the very largest hospitality properties across Scotland;
  • Day Nursery Relief for all standalone nurseries in the public, private and charitable sectors;
  • New Fibre Relief for all new fibre infrastructure for telecommunication;
  • relief for mobile masts in selected geographic locations; and
  • Fresh Start Relief, which offers 100% relief for all reoccupied properties that have been empty for six months.

Non-Domestic Rates tax rates, 2020‑21

Basic Property Rate ('Poundage')49.8p
Intermediate Property Rate (rateable values between £51,000 and £95,000)51.1p
(Poundage +1.3p)
Higher Property Rate (rateable value above £95,000)52.4p (Poundage +2.6p)

Air Departure Tax

The Minister for Public Finance and the Digital Economy informed Parliament on 23 April 2019 that the introduction of Air Departure Tax (ADT) will be deferred beyond April 2020. The UK Government will maintain the application of Air Passenger Duty in Scotland in the interim.

Aggregates Levy

Aggregates Levy is a tax paid on the commercial exploitation of aggregates, i.e. sand, gravel and rock. The Scotland Act 2016 gave the Scottish Parliament the power to legislate for a tax to replace the Aggregates Levy in Scotland.

The Scottish Government will continue to work with the UK Government and stakeholders in anticipation of the levy's eventual devolution.

While the proposals in the Draft Scottish Budget 2020-21 are still to gain Royal Assent, the Minister also clarified, on more than one occasion, that the spending and tax plans are also dependent on "sensible agreements" between the UK and the EU; if no-deal is agreed, they will re-adjust the Budget across all bases.

If you would like to discuss any of the points in this blog, please do not hesitate to get in touch with me or another member of our Tax team.