Draft Scottish Budget 2024/25

We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA

For our Clients in Scotland, here is a useful summary from ACCA

The Scottish Budget 2024/25 was unveiled by the Scottish government on 19 December 2023, outlining the Scottish government’s strategy centred on equality, community, and opportunity through a mission-driven approach.

The Deputy First Minister highlighted the exceptionally challenging circumstances for managing public finances, with an estimated spending gap of £1.5bn, citing factors such as the impact of public sector pay agreements and the UK government’s spending decisions in the recent Autumn Statement.

As hinted at in the media, the headline measure announced was the decision to introduce a new income tax band in Scotland, with a rate of 45%, on income between £75,000 and £125,000. The thresholds for starter, basic and intermediary bands are all uprated in line with inflation (6.7% as per CPI), while the higher band thresholds is frozen at £43,663 (see table below). There are no changes to the rate of starter, basic or intermediary bands, while the top band rate goes up 1% to 48%. The controversial decision to freeze council tax rates across Scotland for 2024/25 budgets was also confirmed.

Proposed income tax rates and bands

*Assumes individuals are in receipt of the standard personal allowance.

**Those earning more than £100,000 will see their personal sllowance reduced by £1 for every £2 earned over £100,000.

In a surprising move, the basic property poundage rate for non-domestic rates is to be frozen at current levels (rather than rising by inflation), though the higher value property rate does increase. The Small Business Bonus Scheme will be maintained, while 100% rate relief will be introduced for island-based hospitality businesses (capped at £110,000 for ratepayer). Noting the campaign to introduce wider rates relief for hospitality businesses, the Deputy First Minister announced that discussions would take place with the sector to examine longer term solutions to minimise the rates burden. No changes were announced to rates of Land and Buildings Transaction Tax.

Other key points announced included:

Equality: tackling poverty and protecting people from harm

• committing £6.3bn in social security benefits and payments, including an increase in the Scottish Child payment to £26.70 a week
• investing £1bn over the parliament to address the poverty-related attainment gap and providing £200m in 2024/25
• funding the £12 per hour real Living Wage for social care and childcare workers and supporting households through the cost-of-living crisis.

Opportunity: building a fair, green, and growing economy

• investing in the green economy, earmarking funds to anchor a new offshore wind supply chain and supporting clean heating systems to tackle emissions and create jobs
• allocating substantial funds to public transport, active travel, and infrastructure projects like dualling the A9.

Community: delivering efficient and effective public services

• increasing investment in frontline NHS boards and policing
• boosting digital connectivity infrastructure and maintaining a competitive non-domestic rates regime
• increasing funding for culture and heritage, aiming for a significant investment in culture and the arts by 2028/29.

Despite global and UK challenges, the budget aligns with Scotland’s values, emphasizing investment in people and public services, reflecting the nation’s shared vision.

The Budget will complete the parliamentary process between now and mid-February, meaning further changes are possible, before a final package is agreed by the Scottish Parliament.