Finance Secretary, Derek Mackay, announced that the Scottish Government will now publish its budget on 6 February 2020, in response to the UK Chancellor announcing that the UK Budget will take place on 11 March.

What exactly is the Scottish Budget?

The Scottish Budget sets out the revenue and expenditure of the Scottish Government for the coming year; including forecasts of anticipated revenues from Scottish Taxes, local authority funding and public sector spending.

Why are the dates of the respective Budgets significant?

Typically, the Scottish Budget is held in December, a number of weeks after the UK Budget has taken place. There are good practical reasons for this. Financial forecasts are published together with the UK Budget in relation to estimated tax revenues. These forecasts and other UK Budget policy & spending decisions impact on the top line figure that the Scottish Government sets its Budget to.

Originally scheduled to take place on 12 December 2019, the Scottish Budget was postponed as a result of the unexpected general election on the same day. This delay has presented the Scottish Government with several practical challenges. Scottish Councils are legally required to set budgets and council tax rates by 11 March 2020 - the same day as the UK budget. Additionally, the Scottish Budget process must be completed by 31 March 2020 to set Scottish income tax rates and bands for the coming year.     

The process and related negotiations typically take place from December to February as the Budget Bill passes through the Scottish Parliament and is scrutinised by MSPs. 

What should we look out for?

As we have seen over the past few years, the Scottish Parliament can vary the income tax rates and bands independently from the rest of the UK, however under normal circumstances this is carefully considered against the backdrop of the UK Budget and any impact that may have on Scottish spending via the block grant. Changes are also possible to other devolved taxes such as Land & Buildings Transaction Tax (LBTT) and Air Passenger Duty.

The minority SNP Scottish Government needs the support of at least one other party in the Scottish Parliament (most likely the Scottish Greens) in order to pass the Budget. It will be interesting to see how the compressed timescale impacts on negotiations.

Perhaps the most intriguing aspect of the revised timetable is that the Scottish Government will need to ensure there is enough flexibility in their Budget process to react to any significant policy announcements in the UK Budget. For example, how would UK income tax increases, cuts or changes to thresholds be factored into the Scottish Government’s Budget plans? Similarly, would changes to Stamp Duty Land Tax in England (e.g. increasing the threshold before tax becomes payable) be mirrored with changes to LBTT in Scotland?

Whilst this is an unprecedented timetable for both Scottish and UK Budgets, there is an acceptance that agility is the key to ensuring Scottish councils, businesses and individuals are in the best position come the start of the new financial year. The UK Budget could be heavily influenced by Brexit Day on 31 January and it is difficult to forecast with any certainty whether there will be significant changes in either Budget announcement. One thing that is certain, is that the Scottish Government are likely to announce spending that is focused on the global climate emergency, child poverty and boosting the economy.

To discuss what you can do now to be prepared for any significant changes, please get in touch with your usual Johnston Carmichael contact or a member of the Tax team.