What are Scotland's tax powers?

Crowds on Edinburgh streets
The Scottish Parliament is due to receive new tax-raising powers and the country's political parties are starting to say what they will do with them. So, what tax powers are coming and what does Scotland have already?
What powers did Scotland get in 1999?

When the Scottish Parliament was created 17 years ago it was given the power to put up or cut income tax by 3p in the pound. That power has never been used.

The bulk of Holyrood's money comes from Westminster, calculated through the Barnett Formula.

Devolved administrations in Northern Ireland and Wales - which were also set up in 1999 - were not given powers to vary income tax.

Property tax is different in Scotland, what's changed?

In April 2015, a new tax to replace Stamp Duty, called the Land and Buildings Transaction Tax, was introduced in Scotland. It ditched flat tax payments and instead took a graduated, or stepped, approach - similar to income tax.

There have also been changes to how Stamp Duty operates in the rest of the UK. In December 2014, Chancellor George Osborne announced a similar graduated system.

However, do not expect to pay the same tax on house purchases north and south of the border as the bands and rates are different.

Scotland gets more tax powers soon, what are they?

In April, 2016, there will be a Scottish Rate of Income Tax. It means that...

  • of the 20p now being paid from £1 of basic rate income, 10p of that is going to be levied by the Scottish Parliament
  • and that 10p amount could be varied up or down.

Scotland's current Treasury Secretary, the SNP's John Swinney, is choosing not to vary the figure. And why not? Well, the minister believes the new power is inflexible as he will not have full control over bands and rates of tax.

Aren't there even more financial powers going to Holyrood?

Yes. In April 2017, the Scottish Parliament will receive a package of powers. These include;

  • power to set the rates and bands of income tax on non-savings and non-dividend income
  • half the share of VAT receipts in Scotland being assigned to the Scottish government's budget
  • and power over Air Passenger Duty and Aggregates Levy
What will Holyrood not have power over?

Crucially, what the Scottish government will not be able to do is alter the rates of National Insurance and VAT, which are the two big sources of revenue, along with income tax.

And one of the significant tax powers that is not included in this new batch of changes is Corporation Tax, levied on the profits of companies.

That's unlike Northern Ireland which is set to be given control over that tax in 2018. Its politicians successfully argued that it needed to remain competitive with its island neighbours in the Republic which has a Corporation Tax rate of 12.5%, that contrasts with the current UK rate of 20%.

Although Holyrood will have more control over income tax, it will not be able to set the personal allowance - basically the starting figure at which people pay tax.

What are Scotland's political parties saying?

The SNP said it would not adopt Mr Osborne's announcement - made in his Budget last week - to take anyone earning less than £45,000 out of the 40p tax rate. However, it does not intend to increase the 45p rate currently levied on those earning £150,000 or more a year in Scotland.

Scottish Labour has put on record that it does not want to see the threshold change north of the border. This is at odds with the UK party which has not objected to the Conservative government's proposal.

Scottish Labour has also made clear that it wants to put 1p on tax rates in order to raise money "to protect public services". It said it could give a rebate to those earning less than £20,000. In addition, it would like to see the highest rate of tax - affecting those earning more than £150,000 a year - raised from 45p to 50p.

The Scottish Liberal Democrats want a similar penny increase as Scottish Labour, aimed at protection of education spending. It also says it objects to the 40p threshold change.

A Scottish Conservative-appointed commission argued that the total tax burden should not rise any higher in Scotland than it is in the rest of the UK. It backs the chancellor's approach to thresholds.

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